Final answer:
Efficiency in a tax system means reducing compliance and administration costs, making taxes easier to administer and encouraging taxpayer acceptance. It also involves consideration of the benefit principle and ability to pay principle for equitable tax distribution.
Step-by-step explanation:
When evaluating a tax system, efficiency requires that a good tax system minimize the compliance and administration costs associated with the system. To be deemed efficient, taxes must be easy to administer and successful at generating adequate revenue without incurring excessive costs. Moreover, an efficient tax system encourages compliance and taxpayer acceptance by ensuring that costs are not prohibitively high for individuals and businesses. The two primary tax principles to consider are the benefit principle, which suggests that those who benefit from public services should pay in proportion to the benefits received, and the ability to pay principle which posits that individuals and entities should be taxed based on their capacity to handle the financial burden.