Income Tax Theories - Canons of Taxation - What makes a good tax?

The 'Canons of taxation' were first developed by Adam Smith as a set of criteria by which to judge taxes. They are still widely accepted as providing a good basis by which to judge taxes. Smith's four canons were:

1. The cost of collection must be low relative to the yield
2. The timing and amount to be paid must be certain to the payer
3. The means and timing of payment must be convenient to the payer
4. Taxes should be levied according to ability to pay

Modern economists have added three more canons to these to update and extend them:

5. A tax must not hinder efficiency or should involve the least loss of efficiency
6. A tax should be compatible with foreign tax systems (in the UK's case, with Europe's)
7. Tax should automatically adjust to changes in the rate of inflation (particularly important in high inflation economies)

The best taxes will tie in with all these. The worst taxes won't!