Published on 01 Apr 10
by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
This paper is concerned with ranking the principles of a good tax system in respect of developing countries with large informal economies. It examines the principles of a good tax system and their competing and conflicting tendencies in the context of the causes of informal economies. The analysis of those tendencies shows that a simple tax is better than a complex one, even when meeting this goal clashes with equity and efficiency. Further, simplicity and efficiency should be held in higher regards than equity for fostering economic growth. Similarly, vertical equity may be emphasized less for the sake of securing economic efficiency. Overall, this paper concludes the ranking of the criteria in order of most to least important for tackling the informal economy is as follows: simplicity, efficiency, and lastly equity.
Najeeb is a PhD candidate in the School of Business Law & Taxation at the The Australian
School of Business UNSW.
Current at 1 April 2010