Question

The three criteria for effective taxes

Answer 1

Effective taxes should be efficient, simple, and equitable.

Step-by-step explanation:

If taxes don't meet these criteria, people likely won't be compliant and pay them.

Answer 2

1. Equity: Equity refers to fairness and justice in the division of tax obligations. A successful tax system should try to spread the tax burden in a way that is viewed as fair by society. This can be accomplished by progressive taxation, in which those with higher earnings pay a higher proportion of their income in taxes than those with lower incomes. The idea of equity ensures that individuals and companies contribute to the costs of public goods and services depending on their ability to pay.
2. Efficiency: Efficiency refers to a tax system's ability to minimize market distortions while increasing economic productivity. A successful tax system should be designed to have the least negative influence on economic activity. This can be accomplished by avoiding tax rates that are too high and discourage effort, investment, and consumption. In order to guarantee easy compliance and enforcement, efficiency includes decreasing administrative costs and reducing the complexity of the tax code.
3. Simplicity: Simplicity relates to the simplicity with which the tax system can be understood and followed. A clear and transparent tax system allows taxpayers to easily comprehend their obligations and comply with tax rules. A complicated and confusing tax system can provide confusion, expensive compliance, and chances for tax evasion. A tax system can be more successful in collecting revenue and guaranteeing compliance by keeping the tax code straightforward and avoiding loopholes.