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This article examines the principles that are widely used in designing tax systems. It is apparent that the design principles of Adam Smith are still relevant. However, in light of new business practices including the continued evolution of electronic commerce, they are applied slightly differently. An analysis of the principles used by the OECD in its examination of rules governing electronic commerce and principles developed by the American Institute of Certified Public Accountants shed light on their modern usage. From a comparison of the application of these principles this article recommends the adoption of five principles to govern tax design. This will provide both a common understanding and a common approach to tax design.
This document has been peer reviewed.