Simplicity

Simplicity is the idea that the tax and transfer system should be easy for most people to understand and interact with. Simplicity, by design, makes compliance easier and reduces costs for both taxpayers and administrators. Complicated tax rules or eligibility criteria make it harder for people to understand their obligations and entitlements. This may lead to aggressive tax planning and sub-optimal decision-making, resulting in greater marginal excess burden[42] on the economy and a reduction in efficiency.

Certainty is also linked to simplicity – it should be clear what is being taxed, the amount or rate of the tax, the timing and circumstances under which that tax is applied, and who pays it. Uncertainty and complexity can lead to poor decision-making by individuals, resulting in inefficiencies and inequities, as well as cases being litigated in the court system at the expense of taxpayers and the government.

Achieving simplicity in a tax system involves trade-offs with other characteristics. Some taxes are complex in order to achieve a simpler system in total and other taxes are complex to achieve different goal.