Evaluate the UK tax system in the context of Adam's Canon of Taxation Essay

Evaluate the UK tax strategy in the context of gos legislation of receipts - Essay Example2008). In UK today, there exist no published figures on this particular gap but statistics from the Tax Justice meshwork (TJN) indicate that UKs fifty largest companies have paid an average of 5.7 per cent less corporation tax than expected rates from 2000 to 2004 (Wolfgang et al. 2008). This largely depends upon what is expected and some(a) of the assumptions made atomic number 18 questionable. For instance, in UK, TJN has associated this with excessive corporate tax allowances given to motivate investment in plant and machinery that in turn result into blue levels of deferred taxation (Wolfgang et al. 2008). Today, capital allowances constitute examples of various express tax relief and incentives, which are regarded by most presidential terms as desirable in the context of their sparing policies. Recent report findings by the National Audit Office in UK identified that, around 220 of the largest UK 700 companies paid no tax at all in the years 2005 and 2006, which led to concerns being widely highlighted in the media that there were high levels of corporate tax avoidance (Wolfgang et al. 2008). Therefore, this research paper will largely looking at and make evaluation of the UK tax system in the context of Adams Canon of Taxation. Background to Adams Canon of Taxation Adam Smith is considered the father of modern economics and part of his contribution to the field of economics was presentation of four principles of a good taxation system known as Adam Smiths Canons of Taxation (Smith and Cannan 1976 Smith and Sutherland 1998). The four principles are as follows Canon of Equity, in the words of Adam Smith, population of every state should pay their share in proportion to their individual abilities, which means that they should pay tax proportion to that income which they respectively get under the government security (Jain, Kaur, Gupta and Gupta n.d, p.30). Th e basic assumption of this law is that, passel are supposed to pay taxes according their capacity, while equity in this sense means people should demonstrate equality of sacrifice in paying tax. For instance, since the rich peoples marginal utility of money is less than that for the poor, rich people are supposed to pay more amounts in taxes than the poor people (Jain, Kaur, Gupta and Gupta n.d). Therefore the principle of justice is implicated in this doctrine (Nicholson 1928) and in the words of Adam Smith, It will be more justified for the rich to contribute to the public expenditure not only what is proportionate to their income but more than that (Jain and Khanna 2006, p.349). The second command is that of certainty, where the postulation of this principle is that, there need to be a certainty regarding taxes (Das, 1993). For example, in Smiths words the tax which each individual is bound(p) to pay ought to be certain, and not arbitrary and that time of payment, the manner o f payment, the quantity to be paid ought to be clear and plain to the contributor and to every separate person (Jain, Kaur, Gupta and Gupta n.d, p.30). These assumptions show that, in any taxation system, individuals must know how much tax they are supposed to pa