1. DISCOVER . LEARN . EMPOWER
CANONS OF TAXATION
University Institute of Liberal
Arts and Humanities
BA (Hons) Liberal Arts
Course Name – PUBLIC FINANCE
Course Code – HEC 304
Faculty Name – Dr. Vipul Gupta
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COURSE OBJECTIVES
1
This course is designed to understand the role and functions of the
government in an economy have been changing with the passage of time
2
It also helps in understanding the concept of budgetary policy as it is
important part to recognize the basic problems of use of resources
,distribution of income etc
3
The subject provides the basic knowledge of fiscal institutions- tax
systems, expenditure programmes,budgetary procedures
The Course aims to:
3. 3
COURSE OUTCOMES
CO Number Title Level
CO1 Students will analyse the concept of public goods ,
market failures and Externalities
Analyse
CO2 Students will be able to understand the role of
government taxation and expenditures and its
implications for allocation , distribution and
stabilisation
Understand
CO3 Students will be evaluate that the Public economics is
the study of government policy from the point of view
of economic efficiency and equity
Apply
On completion, the students are expected to
4. CONTENTS
• CANONS OF TAXATION
• CONCEPT OF EQUITY
• HORIZONTAL EQUITY AND VERTICAL EQUITY
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5. CANONS OF TAXATION
• Canon of Simplicity
• This norm suggests that tax rates and tax systems ought to be simple and
comprehensible and not to be complex and beyond the understanding of
the layman. This is what is rarely found in the Indian tax structure.
• Canon of Diversity
• Canon of diversity implies that there should be a multiple tax system of
diverse nature rather than having a single tax system. In the former case,
the tax payer will not be burdened with a high incidence of tax in the
aggregate.
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6. CANON OF EXPEDIENCY
• This suggests that a tax should be determined on the ground of its
economic, social and political expediency.
• For instance, a tax on agricultural income lacks social, political or
administrative expediency in India and that is why the government of
India had to discontinue it.
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7. EQUITY IN TAXATION
• The concept of equity has two notions:
• (i) Horizontal equity and
• (ii) Vertical equity
• Horizontal equity suggests that in the matter of taxation, equal treatment
should be meted out to people in equal economic circumstances, which
means that they should pay equal amount of taxes.
• Vertical equity means that unequally placed persons should be treated
unequally, thus, economically better placed people should pay more taxes
than others.
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8. HORIZONTAL EQUITY IN TAXATION
• Horizontal equity is an economic theory that states that individuals
with similar income and assets should pay the same amount in taxes.
• Horizontal equity should apply to individuals considered equal
regardless of the tax system in place. The more neutral a tax system is
the more horizontally equitable it is considered to be.
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9. HORIZONTAL EQUITY IN TAXATION
• Horizontal equity proposes a tax system that does not give
preferential treatment to certain individuals and companies.
• In effect, it is related to the concept of tax neutrality as it protects
taxpayers against arbitrary discrimination so that if two individuals
are equally well off before taxes, then they should be equally well off
after taxes.
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15. Assessment Pattern
Students are assessed on the basis of the following
parameters:
• Hourly Tests - 2
• Assignments
• Surprise Test
• Quiz
• Student Engagement
• End Semester Exam
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