Simplicity, certainty and stability: in ACCA’s view these are the three cornerstones of a good tax system. Policy makers should consider them any time they plan to change the tax system. They are also the benchmarks by which taxpayers can assess the effectiveness of government in maintaining and improving tax systems.
Tax systems are fundamental to society. They are the conduit through which the state gathers the resources it needs to support public spending, and are often the direct mechanism of implementing policy. Every citizen is affected by the operation of tax systems, and the efficiency and effectiveness of the system and its administration will have effects far beyond the direct impact of tax collection.
Tax systems have grown ever more complex, reflecting the societies and economies in which they operate. As the world changes around them, tax systems must change to keep up. The arrival of the container, the executive jet and the internet have changed the face of world trade and domestic economies beyond all recognition. The enhanced mobility of goods, people and capital has transformed societies but the importance of tax in maintaining those societies is undiminished.
The three functions of a tax system (revenue raising, redistribution and regulation of economic behaviour) will be achieved in different ways at different times. As policy makers react to change, and seek to influence it themselves, they will be faced with choices over what to tax, and how to do so.
ACCA has identified three fundamental considerations which every system should strive for, and by which citizens can measure the success of governments and tax administrations in developing laws and processes, and the resources to administer them, for the greatest benefit of society. Regardless of the policies adopted by government, the role of the tax system in funding or implementing them should be designed to best reflect the optimal balance between simplicity, certainty and stability.