Sunday, May 24, 2020

The Canons Of Good Taxation Essay - 1464 Words

Canons of good taxation refer to Adam Smith’s study illustrated in the book ‘Wealth of Nations’. The canons consist of equity, certainty, convenience and efficiency are used to determine the effectiveness of a tax system. This report will critically analyse these canons in relation to the recent bright-line test announced by the government. The bright-line test seeks to improve upon the intention test under ss CB 6-CB 15 by proposing income tax on gains received from disposal of residential property within 2 years of purchase. This new rule is used to address property speculation, as it is seen as the primary cause of the increasingly high residential property prices in New Zealand in particular Auckland. The average value of residential homes in Auckland in February 2015 was $786,106. Now in February 2016 the average value is $925,656 that is a staggering 17.8% increase in just one year. Generally speaking, the bright-line test is in favour of Adam Smith’s canon of equity. This is because it further taxes New Zealanders, who derive the ‘same’ income through wages and salaries as someone who receives income through the sale of property (Provided it is within 2 years of purchase). Beforehand, only people who fail the intention test under ss CB 6-CB 15 would be exempt from tax. The bright-line test acts as a supplement to the intention test, resulting in a greater number of people with similar incomes being taxed and thus increasing what is called horizontal equity.Show MoreRelatedCorporate Taxation Essay1986 Words   |  8 Pagesare collected via taxation. These are the most basic operations of government which requires tax funds. A few other complicated reasons for the collection of tax can be to fund wars or encourage a rapid economic development – which all requires funds. Tax policy can also be very useful and effective to attain price stability, control business boom and depressions and to maintain full employment. 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