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Taxation is the most important and difficult part of public finance. Now a days, taxes are levied not only to collect revenue but also to achieve the many other objectives. For example to bring the equality in income of people, for maintaining the high rate of employment and for increasing the rate of economic development.


Here are canons of taxation:

Canon of Equality:
This is important that burden of tax should be equal on every tax payer. People should pay the taxes to the government in protection to their incomes. In other words, we can say that percentage of taxation should increase with increase in incomes and should decrease with decrease.

Canon of Certainty:
It means that tax payer and tax collector should know the exactly what, when and how tax payer has to pay the tax. If tax is not certain and is arbitrary, then the officials will be ready to reduce the amount of tax. If the bribe id offered, if tax is certain, the tax payer feels less burden.
Thus is said, “ An Old tax is not tax”

Canon of convenience:
Every tax should be levied at the time and manner that is more convenient to the tax payer.

Canon of Economy:
If the cost of collection of a tax is small, it is called economical. If people have to pay too much tax but small amount goes to the government treasury due to heavy salaries to the staff then tax is not economical.

Canon of Productivity:
It means that tax should bring sufficient revenue. If large amount of taxes produce less revenue then it is not better if small amount of tax produce the large amount of revenue then it is very convenient and better.

Canon of Elasticity:
Its means that tax should be increase or decrease according to the needs of the government such as in Pakistan tax system is very elastic and a little increase rates brings too much amount of revenue.

Canon of Simplicity:
Its means that tax system should be very simple so that people can easily know who has to pay tax and how much. But it the procedure of tax system is complicated then there are too much changes of corruption.

Canon of Diversity:
There should be various types of taxes, so that all classes of people have to pay some kind of tax. In this way all people can contribute to the state revenue. Some taxes should be direct and others should be indirect.

Canon Of Uniformity:
U\It means that tax system should be uniform for all. For example People of a Developed city have to pay high tax than people of a under developed city, the tax system will not be uniform.

Canon of Flexibility:
Beside the individual tax, the whole tax should also be elastic. A tax system that can eliminate the inflation and depression is desirable level.

UN harmful for economic incentives:
This nature and rate of tax should be such that does not have bad effects on people’s incentives for economic efforts. Or example very high rates of income tax discourage economic effects.