Least sacrifice is interpreted in the group sense. Theories of Taxation which the government adopts should be equitable so that tax avoidance is decreased. These theories of taxation may, accordingly, be classified as individual theories. Tax morale is an interesting topic, as it allows to check to which extent it makes sense to extend economics with aspects from other social sciences as, e.g., social psychology or sociology. THEscience of taxation coillprises two subjects to which the character of pure theory may be ascribed : the laws of incidence, and the principle of equal sacrifice. Tax Policy in the PFI relates to the formulation of a tax strategy which is supportive to investment. . (7) It is interesting to extend these results to the case of a given revenue to be raised by taxing certain commodities only. together, the taxation of wealth transfers under any guise is qualitatively distinct from the taxation of wealth holdings, the latter having been examined in subsection 9.B.2 as a species of capital income taxation.2 1 On the use of such tax base defi nitions as if they were normative principles, see … really . It covers the advantages and disadvantages of alternative tax … . is an integral part of the general theory of Y~~u~."--~~ARsH.~LL. The literature on optimal taxation typically treats the social planner as a utilitarian: that is, the social welfare function is … The design of an optimal tax policy , in a wide sense including all public services funde d with tax revenue, affects all members of a society. The least-sacrifice theory, on the other hand, is a group theory of taxation. 1927] A CONTRIBUMON TO TE THEORY OF TAXATION 51 Z 4dx. . A country’s tax regime is a key policy instrument that may negatively or positively influence investment. Google Scholar R. Musgrave and P. Musgrave, Public Finance in Theory and Practice, (New York: McGraw-Hill, 1989). J.E. . Because '2 This definition is the accretion concept of income, which defines income as the sum of consumption and accumulation.13 Robert Haig published his definition of income in 1921, explaining income as follows: Es says on the Theory of Optimal Taxation : An Overview Introduction Taxation is always a topical research topic, not least because of its policy relevance. the breakthrough of optimal tax theory (see, e.g., Atkinson and Stiglitz (1972, 1976), Sandmo (1974, 1976), and Sadka (1977)). both theories is the distribution of the tax burden among individuals possessed of varying incomes. Tax Theories and Tax Reform early contribution of Georg von Schanz. The standard theory of optimal taxation posits that a tax system should be chosen to maximize a social welfare function subject to a set of constraints. A number of theories have been put forward by different economists explaining how justice in taxation can be achieved among which the following are important theories of taxation and are discussed as follows : Today the theoretical case for differentiated commodity taxes seems widely accepted, but at the same time there is a widespread THE PURE THEOEY OF TAXATION The theory of the inciilence of taxation . R and their solution is evidently given by dxl dx2 dxo 0<0 (4) x1 X2 i.e., the production of each commodity should be diminished in the same proportion. Meade, The Meade Report on the Structure and Reform of Direct Taxation (London: George Allen & Unwin for the Institute of Fiscal Studies, 1978).