A theoretical exploration of neutral understandable legislation as a fundamental principle of taxation, and of factors that contribute to such legislation

Abstract

Throughout history, Taxation appears to have been universally unpopular in every kind of society. Therefore, to avoid taxpayer revolts, taxes should be levied in a manner that is acceptable to those on whom they are levied. Governments should attempt, as far as possible, to achieve equilibrium between fiscal expenditure and attaining the goals of the state, and the taxes imposed upon its subjects. In order to achieve this, legislation applicable to Taxation should adhere to certain fundamental principles. This study aims to explore the history and characteristics of, and the reasoning behind the Fundamental Principles of Taxation, and proceed to focus on the proposed Fundamental Principle: Neutral, Understandable Legislation and the factors that contribute to making it neutral and understandable, namely Simplicity, Neutrality, Optimal design, Certainty and Tax Law. The Fundamental Principle: Neutral, Understandable Legislation is dissected by examining the definition of, and rationale for each contributing factor, its origin and historical development, and its current application and general trends. Research results indicate that the contributing factors have guided fiscal policies for centuries and that their importance in balancing the taxes imposed against the needs and goals of the state cannot be overstated. This study concludes by affirming that merit definitely exists for Neutral, Understandable Legislation to be deemed a Fundamental Principle of Taxation.