They are:
(1) Fiscal adequacy. – It means that the sources of the revenue, that is, receipts therefrom, taken as a whole, should be sufficient to meet the demands of public expenditure. It means also that the revenues should be elastic or capable of expanding or contracting annually in response to variations in public expenditures.
The alternatives are (a) to incur the risk of a series of deficits or surpluses due to inelastic revenues; or (b) to adjust the amount of public expenditures to fit the flow of funds probably or curtailing certain activities so that the budget may be balanced. Elasticity may be obtained without creating any new tax machinery but merely by changes in the rates applicable to existing taxes. Views may differ, of course, as to the means of attaining elasticity in tax revenues.
(2) Equality or theoretical justice. – It means that the tax burden should be in proportion to the taxpayer’s ability to pay. This is the so-called ability-to-pay principle. It also connotes that the contribution of each person towards the expense of the government should be so apportioned such that he would feel neither more nor less inconvenienced from his share of the payment than every other person experiences from his.
In other words, taxation should be uniform as well as equitable; and
(3) Administrative feasibility. – It means that the tax laws should be capable of convenient, just and effective administration.
No tax, however ideally just and fair, is better that its actual operation. Each tax in the system should be clear and plain to the taxpayer, capable of uniform enforcement by government officials, convenient as to the time, place, and manner of payment, and not unduly burdensome upon, or discouraging to business activity. Tax laws should close up loopholes for tax evasion and deter the unscrupulous officials from committing frauds in the assessment and collection of taxes.
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