Taxation is a dynamic economic and social tool and must inevitably change in nature as national economies and business sectors develop. Green taxes, for example, were unheard of 20 years ago. But there are also some enduring maxims. Below are ACCA’s 12 tenets of tax.

A presumption to tax neutrality

Governments must seek to remove the distortions in their own national tax systems and work together to try to iron out the differences in tax bases which give rise to tax arbitrage.

Openness and transparency

Tax payers should understand what they are paying, why they are paying it, and what the benefits of paying will be.  

Simplification

Tax legislation and operations should be as simple and straightforward to understand and to comply with as possible. Complexity in the tax system is in itself a distortion of the economy

Certainty

Many tax systems require the tax payer to self-assess their liability to tax. The wording of the legislation should make it possible for tax payers to accurately establish their liability.

Accountability and regular review

Tax systems should be periodically overhauled and consolidated. This review brings the tax system up to date and makes it easier to follow.

Tax policy is a percentage of GDP

Levels of taxation should be clearly stated as a percentage of Gross Domestic Product. A rapid rise in the taxation burden to a level which cannot be supported by the economy can do immense harm

Efficiency

Governments require efficient tax systems to secure the revenue due and to prevent tax leakage. But the system should also be efficient for taxpayers in complying with its requirements.

Tax shifting and hypothecation have a role to play

Elected governments have the right to use taxation in certain circumstances in pursuance of agreed social policies. One of the most important examples is to change behaviour which can damage the environment.

Tax is a matter of national sovereignty

Globalisation means that each country should ensure its tax rates are competitive and its regime user-friendly. It is the quality of the underlying tax system – rather than a simple focus on comparative tax rates – which matters to companies.

Tax is subject to the rule of law

Taxpayers are under a moral obligation to pay the level of tax set by the law. There is a clear division between tax avoidance which is legal, and tax evasion which is not.

Respect for Human rights

The huge inequality in resources and power between governments and individual taxpayers places a responsibility on states not to impose their will in the field of taxation in an arbitrary or vexatious way.

Avoidance of double taxation

An essential principle of tax law must be that income should be subject to tax only once. This applies both to direct tax and consumption taxes.

About Chas Roy-Chowdhury, lead author, ACCA

Find out why we're asking for feedback