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Basic Principles of A Sound Tax System

This document outlines the basic principles of a sound tax system: 1) Fiscal adequacy - taxes should be sufficient to meet government expenditures and adjust to changes in spending. 2) Administrative feasibility - tax laws should be enforceable and close loopholes to prevent evasion or fraud. 3) Theoretical justice or equity - taxes should be based on taxpayers' ability to pay. It also notes that while a tax law may still stand if it violates the first two principles, a law violating theoretical justice/equity would be unconstitutional and void.

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Alvin Niño
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83 views1 page

Basic Principles of A Sound Tax System

This document outlines the basic principles of a sound tax system: 1) Fiscal adequacy - taxes should be sufficient to meet government expenditures and adjust to changes in spending. 2) Administrative feasibility - tax laws should be enforceable and close loopholes to prevent evasion or fraud. 3) Theoretical justice or equity - taxes should be based on taxpayers' ability to pay. It also notes that while a tax law may still stand if it violates the first two principles, a law violating theoretical justice/equity would be unconstitutional and void.

Uploaded by

Alvin Niño
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Basic Principles of A Sound Tax System

F-A-T-(E)

1. Fiscal Adequacy - sufficient to meet governmental expenditures; revenues should be elastic or


capable of expanding or contracting annually in response to variations to public expenditure.
2. Administrative feasibility – capable of being effectively enforced; tax laws should close-up the
loopholes for tax evasion and deter unscrupulous officials from committing fraud.
3. Theoretical justice or equity – based on the taxpayer’s ability to pay
4. (Economic Elasticity) – requires a tax law be elastic; it need not be amended every time the
government needs funds.

What is the effect if a tax law is not fiscally adequate? Will it make the law void ab initio?
- No. The remedy is to pass another law or to amend to make it fiscally adequate.

If the tax law violates administrative feasibility, will be void?

- No. Again, amend or pass another law.

If the tax law violates theoretical justice or equity, will it be void?

- Yes. Because it is required under the constitution. Of the three principles, only theoretical
justice is expressly provided for in the Constitution.

Scope: To Determine –

1. Purpose
2.

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