tax relief (tax equity, equality trust)

In other words, at this time actually existed regressive scale of tax taxation – the more a taxpayer’s property was, the less they paid. The poorer layers of society, on the contrary – they paid the largest part of their revenue as taxes to buy bread, salt, sugar and other essentials.

Thus, A. Smith’s ideas about equality and justice were exceptionally progressive and bold at this time. Modern tax system is based on progressive income taxation. Nowadays the content of these principles is different from the understanding in the A. Smith’s era: the more income is, the more tax must be paid.

According to the horizontal aspect of equality and justice the taxpayers who are in equal conditions should be considered equally by tax legislation, i.e. such taxpayers should be taxed the same tax rates.

There are two approaches to realizations of the principle of equality and justice in the world practice,tax relief. The first approach provides the benefits of the taxpayer. According to this approach paid taxes corresponds to the benefits which are given from the state services. So the taxpayer is returned some part from paid tax from the budget by funding various compensations, transfers, education, health and other social costs. The second approach is the taxpayer’s ability to pay tax.  In this case, this approach isn’t related to the budget spending structure – each pays its own taxes in accordance with its solvency.

These two approaches are considered in tax systems construction of the world practice, that provides favorable conditions for realization of the main principles of tax system construction.

The principle of effectiveness is essential among the tax taxation economic principles, which actually consists of two independent principles and is combined with the general ideology of efficiency:tax relief.

Taxes shouldn’t influence on economic decisions or the impact should be minimal. In other words, taxes don’t have to obstruct production development.  Effective tax system means the existence of such instruments, which stimulate economic growth, economic activity of citizens and organizations. Realization of this principle is only possible when the tax isn’t imposed on industrial capital, but directly on the income. The main idea isn’t rejection an opportunity of industrial taxation, but the tax rate doesn’t exceed the level that will lead to a reduction of the property.