The principles of taxation, such as that taxes should be equitable
Governments follow a set of principles when designing taxes. The most important principle is equity — taxes should be fair, so people pay amounts that reflect their ability to pay.
Real World
Adam Smith's four canons of taxation — originally published in 1776 — still underpin UK tax design; HMRC's 'Making Tax Digital' initiative, for instance, directly targets the certainty and convenience principles.
Exam Focus
When evaluating a tax, apply at least two named principles (e.g. equity and efficiency) and explain how the tax succeeds or fails each one.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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