Adam Smith's Tax Theory

The price of a commodity according to Adam Smith, is made up of three elements: wages, rents and profits which are the three original sources of all revenues as well as exchangeable value. Smith also discusses the idea of the embodied labor theory of value. He states that 'it was not by gold or by silver, but by labor that all the wealth of the world was originally purchased'. It can be noted that Ricardo and Marx capitalized on Smith’s ideas in developing the labor theory of value.

In his theory sit the determination of prices. Smith distinguishes between natural and market prices which correspond to the long-run and short-run equilibrium prices respectively. The longs-run equilibrium price of a commodity is equal to its natural price which

Also that the payment of taxes should be clear to the the taxpayer and tax collector. That the method, manner and time of payment should be convenient to the taxpayer and that the cost of collection in relation to the text you should be minimal. In practice, tax systems to reconcile the conflicting aim of these different principles of taxation. A tax system can be judged by the extent to which it conforms to the principles. An underlying objective of most tax systems, however, is equity and this may be achieved by applying either the benefit principle or the ability-to-pay

There is a popular misconception that the government borrowing increases the national debt and therefore impoverishes the nation. But if the data center now, so therefore less of the government securities are the countries on citizens, then increasing the depth is on like to have a significant effect on economic welfare. One effect will be to change the distribution of income as interest payments on the debt are financed from taxation. Another effect may be to reduce the availability of funds for the private sector, but this will only result in a welfare loss if you return on the funds used in the private sector is greater than in the public sector. From the standpoint of equity, if larger government borrowing means less taxation then it depends upon whether it is direct or indirect taxes which are reduced. A reduction in direct taxes therefore benefit the rich. The financing of interest payments on taxation, however, will represent a transfer of purchasing power from all taxpayers to the richer members of society who owns the securities. This effect will be reduced if some part of the interest payments are themselves financed from