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What are indicators of a good tax system?

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Indicators of a good tax system include;

  • Equity - Tax burden should be distributed among the tax payers according to their ability to pay
  • Economy - Collection and administrative cost of the tax should not exceed tax revenue collected
  • Flexibility - Tax system should be capable of being revised or changed in line with the changing economic conditions.
  • Diversity - Different types of tax so that tax burden is on different groups of the society.
  • Elasticity - Tax revenue should be capable of responding appropriately to changes in national income.
  • Simplicity - The tax system should be understood by tax payers and the collectors. This motivates them to pay tax.
  • certain -The one expected to pay should be clearly aware of how much he/she is paying. The tax collector/government should also be aware of how much it is supposed to collect from tax.

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