1. Principle or Canon of Equality:
The first canon or principle of a good tax system emphasised by Adam Smith is of equality.
According to the canon of equality, every person should pay to the Government according to his
ability to pay, that is in proport
4. Canon of Economy:
The Government has to spend money on collecting taxes levied by it- Since collection costs of
taxes add nothing to the national product, they should be minimized as far as possible. If the
collection costs of a tax are more than the t
(Tax 1: June 2007 Question 3)
(a) Distinguish between forward and backward shifting of a tax (2 marks)
FACTORS THAT DETERMINE TAX SHIFTING
Giving appropriate examples, distinguish between forward and backward tax shifting.
In the case of government price control, the supplier cannot increase prices hence cannot shift
tax burden to buyers and vice versa.
If taxes are imposed on certain regions, it is hard to shift them to consumers because consumer
(Tax 1: June 2005 Question 2)
a) Define the following terms
i) Impact of a tax
ii) Incidence of a tax
Definition of Incidence of Tax:
One of the very important subject of taxation is the problem of incidence of a tax. By incidence
Average 2014 Projected Tax Rate for Individuals by Income Level - Produced by Tax Policy Center
When people talk or debate about progressive tax systems they are usually referring to the
income tax that is due on April 15th of every year. It is important
THEORY OF TAXATION
At the end of this chapter, the student should be able to:
Understand the various types of taxes imposed in Kenya
Explain the importance of taxes in a country
Explain the principles of taxation
Water supply and sewerage.
Sports and cultural activities.
Entertainment and information on radio and television.
4. To participate in the production and marketing of commercial goods and services:
Cost of establishing public enterprises such as parastata
Kinds of taxes
i. Income tax this is tax imposed on annual gains or profits earned by individuals,
limited companies, business and other organisations. The income tax will be explained
in chapters 2 to 5.
ii. Value added tax (V.A.T.) This is tax imposed o