The three criteria for effective taxes are simplicity, efficiency, and equity. The other important criteria that must be fulfilled for having effective taxes are administrative ease and transparency. You can read about the Taxation in India – Direct taxes & Indirect Taxes, Features of Taxation System in the given link.
Among the important criteria, equity criteria can be bifurcated into vertical equity and horizontal equity. Vertical equity means the proportion of tax paid by rich people should be similar to the proportion of tax paid by the poor people. Horizontal equity means similar amounts of taxes have to be paid by people having similar financial positions.
Further readings:
- Economics Notes For UPSC Examination
- UPSC Mains General Studies Paper-III Strategy, Syllabus & Structure
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