Adam Smith in his book "Wealth of Nation" lay down four canons of good tax systems. These are:
(i) Equity: Persons should pay according to their ability. The principle reflects a concern for the poor members of a society.
(ii) Economy: The principle states, that the cost of collection should be cheap relative to the revenue yield of the tax.
(iii) Convenience: A tax should be convenient as to form, time and place of payment. For example, an import duty is due and paid as the imported goods arrive the country.
(iv) Certainty: The tax should be certain and clear to everybody concerned. The time of payment, the manner of payment and the amount to be paid should be clear and plain to the tax payer.
(i) Taxes are imposed on Nigerians to promote economic growth. This can be achieved by imposing lower tax on company profits that are ploughed back into the business.
(ii) Taxation is used to effect the redistribution of income in the society.
(iii) Taxes are used to provide social services such as education, poverty alleviation, social insurance etc.
(iv) Taxes are means of controlling the economy in order to achieve full employment. By levying the people, the government can influence the rate of consumption and savings.
(v) Taxes can also be used to improve the balance of payments of the country.
(vi) Taxes are imposed on Nigerians to generate revenue for the government for the provision of social amenities.