“As the pace of change continues unabated, it is inevitable and advantageous that reports into tax design are founded on fundamental tax design principles. In the interests of common understanding and consistency, it is useful to have a set of principles such as those of Adam Smith that are widely applied. At the same time and in light of modern business practices including the ongoing development of electronic commerce it is suggested that Smith’s principles need modernizing” (Alley, C., & Bentley, D,2005,P624) David Ricardo’s taxation methods are viewed less critically than Smith. According to Ricardo, taxation either falls upon capital or profit. Capital can be expanded in two routes: increasing in production or decreasing unproductive consumption. In general, taxation tends to slow down the process of capital accumulation. If the taxes fall upon the profit, producers or merchants will pay out part of their revenue as taxes. There is doubtless that their capital will decrease. At the same time, the state tries to use the taxes to stimulate the production. Hence, if taxes are levied from revenue, the national capital …show more content…
equity, certainty, convenience and economy. Furthermore, Ricardo adds additional three taxation principles, which are distribution neutrality, price neutrality and minimum taxations. Takuo Dome in his paper “Ricardo on income tax: A note” argues that Ricardo’s principles are ideal but not practical. Hence, Ricardo ideas are not fit in any current taxation system. According to Takuo Dom, “This dilemma may explain why Ricardo gave up trying to establish an ideal taxation system, and why he did not often refer to actual tax policy such as an income tax. He knew that an income tax did not fit his criteria for taxation, and that there was no other tax that could satisfy these criteria”. (Dome, Takuo,200,