The 10 principles in more detail: 1.

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

Taxation Principle #1 deals with the subject of dignity and justice and fairness in taxation. There is dignity in the paying of tax by the poor. In most current tax theory and legislation it is erroneously held that poor people do not deserve respect and belong to an underclass that needs special tax treatment and cannot function with dignity as respectable full function citizens that proudly will contribute to and participate in the financial support for the running of their own governments. That sort of paternalistic thinking places "the poor" into a class by itself, rather than an integral part of society with the same rights and duties of everyone else. That sort of undoubtedly well meaning but divisive class strife baiting and paternalistic thinking gave rise in the past to the notion that only those who pay taxes should have the right to vote. The warped justification leading to progressive taxation shows a total lack of understanding of taxation to believe that excluding the poor from this or the other tax makes them exempt from taxation. It is wrongly thought that "the poor" need tax breaks financial support and that "the rich" should foot the bill for that financial support by paying higher taxes. It is a complete hoax and fallacy to propose to exclude "the poor" from taxation and that taxes should be structured according to the arbitrary socialistic doctrine of "ability to pay". Under all systems of taxations the poor pay taxes embedded in every product or service they consume. The embedded taxes they pay are in direct proportion to their spending. The exclusion of the poor from certain taxes is arbitrary and the establishment of tax brackets is not only arbitrary but also out of proportion "to the revenue which they respectively enjoy under the protection of the state". The concepts of current tax theory are in gross violation of Adam Smith #1 maxim and Automatic Tax is in total compliance with Adam Smith #1. Moreover, the vast majority of people who are classified as "poor" are young and will make a natural transition to all the higher levels of economic success with a proportional percentage distribution to all levels of economic wellbeing including the ascension by a small percentage of them to the level of "the rich". 2. The tax which each individual is bound to pay ought to be certain, and not arbitrary. This "Adam Smith's tax maxim #2" requires a very simple tax rate that applies to any and all economic transactions without exception, so that everybody knows what the tax rate is and that there is certainty of the tax and , very importantly, that there shall be no arbitrary exceptions to the tax (no matter how persuasively any proposals for exceptions may be presented by special interests and by well meaning political leanings.) Automatic Tax is in full compliance with Adam Smith's tax maxim #2. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. 3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. This means that a tax should be levied with the least amount of inconvenience to the tax payer. Need I say more, there is zero inconvenience for the tax payer with the way in which tax is paid under Automatic Tax. The Automatic Tax is automatically collected through the banking system exactly at the same time when any money transaction takes place. No records need to be kept by the tax payer, no tax forms need to be filed and no audits will be conducted. Many other tax replacement proposals seek to reduce the inconvenience somewhat or often even a great deal, but none reduce it to ZERO inconvenience as does Automatic Tax which is "levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it". In fact, the taxpayer has to do absolutely nothing because the tax deduction is completely automatic without human interface. The great thing of Automatic Tax is that it not only replaces the federal tax, but also replaces State, County and Local taxes with the single low tax percentage of around 5% tax collected by the banking system. 4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. This means that the total direct and indirect cost of paying and collecting the tax should be as little as possible. The direct and indirect cost and burden on the total economy and society as a whole cannot be expressed in money alone, but with the 17000 page USA income tax code the total, direct and indirect, cost could be as much as $900 billion in 2005 dollars. The direct and indirect cost of collection for Automatic Tax is certainly less than $25 billion. As such Automatic Tax keeps "out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state". 5. A tax should not be used to give favorable tax treatment to special interest groups. Legislators are generally subject to enormous lobbying efforts by special interests and political groups to modify the tax codes in favor of special tax treatment for these groups and the special interests. The Automatic Tax can be easily protected from manipulative use for social engineering and favorable tax treatment by prohibiting any exemptions from the tax for such social engineering purposes and only allow changes or amendments to the tax with a 90% majority vote. 6. A tax should be as broad based as possible, resulting in a low percentage rate that offers little incentive for tax evasion or tax avoidance. Automatic Tax is enormously broad based. It is a tax on all forms of fund transfers except the transfer of funds involved with financial instrument trades such as stocks, bonds and other financial "products". Only the profit portions of such financial transactions are subject to the tax. Also transfer of funds between accounts owned by the same account holder are excluded. In addition there is a

provision for refund petitions on certain transactions deemed eligible by an Automatic Tax refund authority (as detailed in the full 92 page disclosure of the Automatic Tax). 7. A tax must be formulated in simple language easily understood by all who are subject to it. The complete Automatic Tax can be stated in easy to understand language as shown in the "Short Introduction" . A total of fewer than 5 pages of writing are needed to state the full rules of the Automatic Tax law. 8. A tax must have no exemptions. Rather than exemptions, subsidies and grants can be given and there is a special provision in Automatic Tax that provides for an office that handles tax refund requests that may be granted for transactions deemed eligible for such refunds. Automatic Tax follows Adam Smiths and Alf Temme's principles of taxation as closely as possible to create a very simple and effective tax replacement for www.GlobalTaxReform.com . 9. An optimum tax replacement must be able to be phased in very incrementally to create as little economic and political disruption as possible. People and their politicians are very risk adverse and will not easily accept a proposal that will create sudden drastic economic and political changes over a short span of time. The best feature for any tax replacement proposal is if it can be phased in gradually and incrementally without causing more than just minor economic and political discomfort during a almost "painless" transition from the existing tax system to the new proposed tax replacement system. The Automatic Tax can be phased in at 0.1% for the first year. The federal tax revenue can then at the same time be reduced by 2% to offset the amount collected through the 0.1% Automatic Tax. The objective will be to reduce the 17000 page long Federal Income Tax Code by as many pages as is possible to bring about the reduction of 2% in Federal tax revenue that will approximately match the revenue collected through the 0.1% Automatic Tax. The Federal Tax code can already be reduced by a few hundred pages only on account of the first 0.1% step in the Automatic Tax. An additional bonus is that the 0.1% automatic tax will determine nearly EXACTLY what percentage rate the eventual full Automatic Tax needs to be to cover the budget requirements for all levels of government for which it becomes the single combined replacement tax. The following year the Automatic Tax can be raised by an additional 0.3% and Federal tax proceeds can be reduced by another 6% and additional pages of the income tax code can be eliminated to approximately offset the tax collected through the additional 0.3% Automatic Tax. This process can be continued with 0.3% additional Automatic Tax for each following year with matching decreases of additional 6% of the taxes collected through the Federal income tax, and of course additional pages eliminated from the Federal Income Tax Code. This method of phasing the Automatic Tax in and phasing the current income tax out is completely transparent and predictable and will cause the least amount of economic surprise and disruption. It will provide for about 15 to 20 years of total tax predictability that provides for tremendous economic stability and long term economic planning for individuals and businesses alike. This form of phasing in Automatic Tax is less risky for legislators to enact into law because it cannot create the large unexpected economic impact that these legislators could be blamed for later. Both legislators and the general public are very risk averse. That is the reason why normally bold tax reform proposals do not have much chance to be enacted into law. 10. The optimum tax replacement proposal must be able to be demonstrated to be superior to all other "competing" tax replacement proposals so that much needed support behind the optimum tax replacement proposal can be consolidated into a single strong tax replacement organization (www.UnitedTaxReform.com ) and it must be proven that the proposed new tax will indeed bring in enough revenue to adequately replace the total revenue collected under the tax system it seeks to replace. It is quite conceivable that proponents and promoters of other tax replacement proposals may wish to join ranks to promote a tax replacement proposal that can be proven to be superior to the tax replacement they are currently promoting. To demonstrate the superiority of Automatic Tax as the optimum tax replacement proposal it must be shown to be superior in terms of testing all "competing" tax replacement proposals against these 10 sound tax principles. Additionally some of the current tax-myths misconceptions about taxation must be debunked in clear language that is easily understood by all. Catchphrases such as "ability to pay", "regressive, proportional and progressive taxation", "tax fairness or equitability" and other such misconceptions of current forms of taxation have been adopted by well meaning governments that have pushed the United States into the quicksand of socialism and also have promoted class and racial strife where there was none before. Very sad developments promoted by governments everywhere because of lacking understanding of basic economic and taxation principles.

LAMBERT'S MODERN PRINCIPLES OF TAXATION 1. Taxation must be simple. This means "simple" to you and me, not just to the tax profession. It should be noted that in his second maxim, Adam Smith specifically requires that "the time of payment, the manner of payment, the quantity to be paid, ought to be clear and plain to the contributor, and to every other person." If we take this principle seriously it requires the abolition of most of our tax legislation. There are some simple taxes (not many) -- for example, duties on the retail sale of gasoline or petrol, the UK. Community Charge (poll tax); perhaps best of all is the Cayman Islands departure tax (of CI$6 per person), collected at the airport.

2. Taxation must be certain, both now and for the future.

This means what it says, and is one of the reasons why tax reform should be more of a constitutional issue, commanding cross-party support, than a party political football. The government must be prepared to commit itself more than a year in advance, it is, for example, grossly hyprocritical of the Chancellor in Britain to condemn "short-termism" in the investment markets when the British government never commits itself to a revenue budget (which is necessarily part of the private sector's expense budget) more than a year in advance. And what is true of Britain is true of America and other countries.

3. Taxation must be neutral to production, to consumer spending and to saying. This may sound like an ideal, but nevertheless it is an ideal we must aspire towards. If we believe in a truly free market economy, we must get government out of the market and stop it disrupting and distorting the market. This principle probably require; the abolition of more tax legislation than any other. Even the (seemingly innocuous) Cayman Islands departure tax is a tax on tourism and therefore on international trade.

4. The costs of determination and collection of taxation should be the lowest possible. This is a reiteration of Adam Smith's fourth maxim, which was even preceded by Jean Baptiste Colbert's famous maxim that "The art of taxation consists of so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." It should be noted, however, that included in the equation must be the taxpayer's private costs, of a whole army of tax managers, advisors, accountants and lawyers, whom he has to employ at his expense. The major costs of the tax system lie hidden here, not in the Inland Revenue's or IRS's operating budget. (Moreover, the demand for such private services necessarily takes talent away from other industries and professions.)

5. Net tax beneficiaries should not pay tax; net taxpayers should not receive benefit payments from the government. This means abolishing the lunacy of paying taxes and then claiming refunds, and the taxation of grants, subsidies and benefits (such as the taxation of social security payments). But it also means such things as abolishing income tax on government employees' salaries. (When the British government purports to deduct PAYE income tax from its employees' wages, who does it pay it to?) It means combining the existing tax and welfare legislation.

6. There must be no double taxation. Double taxation occurs where you pay (or bear) tax twice in respect of the same asset or sum of money. For example, if you own a house through a company, upon disposal of the house the company may pay tax on the capital gain; when you subsequently dispose of the shares in the company, you have to pay tax on the net capital gain, this time on the shares. Effectively, you pay tax twice on the same profit (the profit arising upon a sale of a house). Similarly, you may be liable to pay two different governments (one local and one national, or two national). A US citizen working in the UK is liable to pay tax to the US and the UK governments. Such double taxation is alleviated (in part) by complex double tax treaties, but these only add to the bureaucracy and expense of international trade. Far better to have a tax which (if universally adopted) would preclude the possibility of double taxation.

7. AH taxation should be levied at source. There are many reasons for this, but the most important is to enable the taxpayer to carry on the tranactions of daily life secure in the knowledge that the government has already been paid and therefore has no further claim and will not disrupt or distort the market. PAYE income tax deducted from wages, and taxation of interest at source are typical examples. If w. believe in taxing wages and interest, this is the way to tax them. Moreover, we now have sophisticated technology which enables us to deduct tax and issue tax invoices relatively painlessly, reducing deduction of tax to a mere by-product of the tranaction.

8. Taxation should be legally levied on the persons by whom it is economically borne. Governments tend to prefer to put taxes on intermediaries, such as banks, employers or retailers. However, such taxes merely become hidden costs and the taxpayer is really misled about the tax he is bearing, if people really knew the true amount of the taxes they were suffering, they would be much more committed to tax reform and economy in public expenditure and would take a much greater interest in politics generally (surely a feature of a healthy democracy). The prime example in recent years has been the UK Community Charge, levied on each individual citizen. Everyone Lad to pay this personally, and it hurt all the more - provoking violent reaction. That is precisely why governments do not like taxing the persons who in the end have to suffer the tax. So they substitute indirect taxes (e.g. VAT) for direct taxes (such as the Community Charge). In the absence of knowledge and understanding by the taxpayer, direct taxation is often a vote loser. However, if indirect taxation is reversed and the reasons for it demonstrated, governments could win elections by demonstrating that direct taxes actually impose a lesser burden in real terms. At first sight, it may be thought that this principle conflicts with Principle 7, for much taxation paid or deducted at source is not legally levied on the persons by whom it is economically borne. The challenge lies in devising taxes that cannot be "shifted" by the persons

on whom they are legally levied; and I believe there are such taxes.

9. Continuous variations in circumstances should not result in discontinuous variations in the amount of tax levied. The great majority of all tax cases (certainly in the UK) involve a dispute between the Revenue and the taxpayer about some borderline transaction. If the government puts a different tax on red wine from that on white, inevitably someone will end up in court arguing about whether or not a bottle of rose or blush wine is for these purposes "red" or "white". Such cases involve all sorts of mental contortions by our judges in an effort to make sense of what is intrinsically nonsensical. The problem can only be solved by the government arbitrarily drawing the line, by legislation. But, while this provides certainty, it also interferes with the natural operation of the laws of supply and demand, and distorts the market. Moreover, it is precisely these sorts of case which spawn the myriad anti-avoidance legislation which gives the Revenue draconian powers to tax the taxpayer according to a transaction which he never actually carried out. (For example", m the UK a contractual provision by a company to pay interest variably according to profits can be treated by the Inland Revenue as a dividend, even though it clearly is not). This apparently quite innocuous principle has some devastating effects. For one thing, it means the abolition of all taxes levied according to residence or domicile in the taxing jurisdiction (i.e. how long you spend in the country). It also means abolishing any differences between the taxation of investment income and the taxation of capital gains. In economic terms, all income from capital is a capital gain.

10. The points at which taxation ceases or starts to be payable should be drawn along borders of economic substance (not legal form). This is similar to Principle 9, above, but not quite the same. It certainly requires not levying different taxes on wines according to their colour. But it also requires, for example, the abolition of all taxes on employment as such. In economics there is no intrinsic difference between the labour that is applied through services, employment or self-employment. Accordingly, a proper tax system should not levy taxes differently according to such distinctions of form. (A vast number of legal cases in the UK have originated from a dispute about whether or not someone was employed or technically engaged on a contract for services.)

11. The action by reference to which taxation is levied must correspond with reality. This should be enshrined in any country's constitution. It requires the abolition and prohibition of all anti-avoidance legislation that seeks to levy tax on the taxpayer according to a transaction which never took place. (Imagine how you would feel if you were prosecuted for murder on the basis that, although everyone knew you had not killed someone, nevertheless you would be deemed to have done so.)

12. Taxation should be payable at times convenient to the taxpayer. This is a reiteration of Adam Smith's third maxim. It is almost universally breached. Far from trying to accommodate the taxpayer's business concerns better, governments tend to be very inflexible about payment. Other creditors of businesses are prepared to extend credit or vary payments; not so the government. A prime example is the British VAT system, which now has harsh financial penalties for late payers. Not only is the government rarely prepared to require payments of tax at times which accord with the taxpayer's actual cashflow, and where appropriate extend credit to the taxpayer, in many cases the government borrows from the taxpayer on an interest-free basis (for example where lax is deducted at source from interest and must be reclaimed by the non-taxpayer at the end of the year). It is only the government's monopoly of the tax system that enables it to abuse its consumers in tins way. We must move to a position, where as with other services, the consumer (i.e., the taxpayer) conies first.

13. The taxpayer should be entitled to free and unlimited advice on his tax position from and at the expense of the government If the taxpayer owes money to the government, absolutely or contingently in the future, he must surely be entitled to be fully informed of the amount and how it can be reduced. If new businesses are to thrive, they must be allowed to compete on equal terms with existing ones. It is large businesses that can afford lo indulge m expensive but highly rewarding tax planning, much of it wholly artificial. We need to move to a system where everyone has equal access to proper legal advice on taxation and where there are no loopholes to be ruthlessly exploited by the better off. After all, there are many other areas of law in which the government funds free legal advice and assistance (in the UK under Legal Aid). Moreover, if the government were to provide the taxpayer with free and unlimited tax advice, it would receive vital feedback from the private sector about the economy; for it would rapidly realise just how much time, money and talent is dissipated in the economy by the whole tax industry, which could be put to more productive use by making the tax system simpler.

14. Since the govcnmient has neither the duty nor the power to be generous, no discretions should be vested in its revenue officials; likewise, taxation should be strictly enforced by the courts. This means the abolition of all "extra -statutory concessions", which are the Revenue's method of making a tax system which is inherently nonsensical and unfair at least a little more sensible and fair, thereby doing parliament's job for it. It also means overruling a

large body of case law in which judges have taken upon themselves the responsibility for ending artificial tax avoidance schemes.

15. Since the government has neither the duty nor the power, through taxation, to destroy anything, taxation must be distinguished from criminal fines and penalties. This means, for example, that the Chancellor in Britain must make up his mind whether he is raising revenue through taxing the sale of leaded petrol or fining it. It also means rejecting the US Supreme Court maxim that "the power to tax is the power to destroy". No government has the right to destroy using the tax system; that is the province of the criminal justice system.

16. Since there is no contractual basis for taxation, taxation should be based on the principle of restitution, and should therefore restore to the community the value bestowed on the taxpayer by the community. The equitable principles of restitution are embedded in the law of most common jurisdictions. Restitution is the remedy awarded to someone who claims that another has been unjustly enriched. For example, a person may not profit from his crime; and property or money paid over under a contract which is void cannot (lawfully) be retained. In the context of taxation, which ipso facto cannot be levied on a contractual basis, the application of this principle means that the taxpayer cannot take the benefits of government expenditure without taking their burden. He must must restore to the taxing community the value which it has bestowed upon him. This principle forms the basis of a whole political economy, indeed a whole political philosophy. It rejects the fiction of the "social contract". It restores equality to the dealings between the taxpayer and the slate. It places limits on the state. It makes justice a central feature of a proper system of taxation. It translates into action the Christian principle that we should render unto Caesar the things which are due to Caesar. Whatever one's personal philosophy or religion may be, fairness and justice are international objectives, understood in every language of mankind. Justice must be a paramount objective in devising a system of taxation, and such justice lies in the application of the principles of restitution.

Canons/Principles of Taxation By Adam Smith: Adam smith, the father of modem political economy, has laid down four principles or cannons of taxation in his famous book "Wealth of Nations". These principles are still considered to be the starting point of sound public finance. Adam Smith's celebrated cannons of taxation are: (1) Cannon of equality or ability, (2) Cannon of certainty, (3) Cannon of convenience, and (4) Cannon of economy. (1) Canon of equality or ability: Canon of equality, or ability is considered j to be a very important canon of taxation. By equality we do not mean that people should pay equal amount by way of taxes to the government. By equality is meant equality of sacrifice, that is people should pay taxes in proportion to their incomes. This principle points to progressive taxation. It states that the rate or percentage of taxation should increase with the increase in income and decrease with the decrease in income. In the words of Adam Smith: "The subject of every state ought to contribute towards the support of the government as early as possible in proportion to their respective abilities that is in proportion to the revenue which they respectively enjoy under the protection of the State". (2) Canon of certainty: The Canon of certainty implies that there should be certainty with regard to the amount which taxpayer is called upon to pay during the financial year. If the taxpayer is definite and certain about the amount of the tax and its time of payment, he can adjust his income to his expenditure. The state also benefits from this principle, because it will be able to know roughly in advance the total amount which it is going to obtain and the time when it will be at its disposal. If there is an element of arbitrariness in a tax, it will then encourage misuse of power and corruptionAdam smith in this connection remarks: "The tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid all ought to be clear and plain to the contributor and to every other person". (3) Canon of convenience: By this canon, Adam smith means that the tax should be levied at the time and the manner which is most convenient for the contributor to pay it. For instance, if the tax on agricultural land is collected in installments after the crop is harvested, it will be very convenient for the agriculturists to pay it. Similarly, property tax, house tax, income tax, etc., etc., should be realized at a time when the taxpayer is expected to receive income. The manner of payment of tax should also be .convenient. If the tax is payable by cheques, the contributor will be saved from much inconvenience. In the Words of Adam Smith: "Every tax ought to be levied at the time or in the manner in which it is most likely to be convenient for the contributor to pay it". (4) Canon of Economy: The canon of economy implies that the expenses of collection of taxes should not be excessive. They should be kept as little as possible, consistent with administration efficiency. If the government appoints highly salaried, staff and absorbs major portion of the yield, the tax will be considered uneconomical. Tax will also to regarded as uneconomical if it checks the growth of capital or causes it to emigrate to other countries, In the words of Adam Smith:

"Every tax is to be so contrived as both to take out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state". Some other Canons/Principles of Taxation Rather Than Adam Smith: Some writers on Public Finance have formulated four other important canons/principles of taxation. They, in brief, are as follows: (1) Canon of productivity: The canon of productivity indicates that a tax when levied should produce sufficient revenue to the government. If a few taxes imposed yield a sufficient fund for the state, then they should be preferred over a large number of small taxes which produce less revenue and are expensive in collection. (2) Canon of elasticity: Canon of elasticity states that the tax system should be fairly elastic so that if at any time the government is in need of more funds, it should increase its financial resources without incurring any additional cost of collection. Income tax, railway fares, postal rates, etc., are very good examples of elastic tax. The government by raising these rates a little, can easily meet its rising demand for revenue. (3) Canon of simplicity: Canon of simplicity implies that the tax system should be fairly simple, plain and intelligible to the tax payer. If it is complicated and difficult to understand, then it wilt lead to oppression and corruption. (4) Canon of diversity: Canon of diversity says that the system of taxation should include a large number of taxes whish are economical. The government should collect revenue from its citizens by levying direct and indirect taxes. Variety in taxation in desirable from the point of view of equity, yield and stability.