Question

A tax administration intended to release a new type of tax With a

projection of generating $1 million per month, suddenly the project
was ceased due to over expensing in the collection process. This
decision is based one of the basic rules of taxation pertaining to-.
a. Legitimacy rule.
b. Tax clarity rule.
c. Cost saving rule.
d. Suitability rule.

Answer 1

The decision to cease the new tax project due to high collection costs relates to the cost saving rule, ensuring efficiency in tax systems.

Step-by-step explanation:

When a tax administration considers the implementation of a new tax, achieving a balance between the revenue generated and the cost of collection is critical. The cessation of the new tax project due to over expensing in the collection process adheres to the cost saving rule. This rule ensures that the tax is efficient, meaning that it is cost-effective to administer and successful at generating the projected $1 million per month without incurring expenses that outweigh the revenue. An efficient tax system must also be equitable and simple so that taxpayers understand and are receptive to the taxation policies. Therefore, taxes must meet these principles to avoid negatively impacting individuals, businesses, and the overall economy.