ABSTRACT
There is no perfect taxation system or perfect taxes. A tax system is in practice an ongoing compromise between various ‘principles’ of taxation (themselves potentially contradictory to one another) and government’s need to finance its expenditure. Nor are the ‘principles’ value-free or agreed upon by all. For example, Foldvary (2006a: 3) writes: ‘the “least bad” tax policy is one that does not violate a citizen’s right to the fruits of his labor or his privacy; does not distort incentives to work and save; and minimizes the costs of compliance and administration.’ If so, there can be no ‘least bad’ tax, since all taxes reduce people’s income or wealth, while the argument that taxes finance public or quasi-public goods and services raises crucial issues as to whether such provision is enough compensation for the loss of welfare experienced by individuals because of taxation.1
