A set of criteria, largely determined by the economist Adam Smith (1723–90), for determining whether a given tax or system of taxation is efficient. The main principles are that taxes should be equitable and certain. Subsidiary principles are that they should distort choices that would otherwise be made as little as possible and that the cost of collection should be as low as possible. Some economists argue that a further principle might be that the tax should be effective in redistributing income.
Subjects: Financial Institutions and Services.