Relevance of Adam Smith Canons of Taxation to The Modern Tax System

A system of taxation has three layers: tax policy, tax laws and tax administration. While taxation has been around for a good number of centuries, the canons of taxation were first presented by Adam Smith in his famous book “The Wealth of Nations” in 1776. These canons of taxation define certain rules and principles upon which a good taxation system should be built. In this paper, using an exploratory research methodology, it was discovered that although these canons of taxation were presented a good while back, they are still used as the foundation of discussion on the principles of taxation and the basis of tax policy, tax laws and tax administration. These canons also form the basis of reforms of any nation tax systems aimed at ensuring tax competitiveness among nations in order to attract human as well as investment capital in a world that have become a global village. When compared against international tax competitiveness index, Nigeria tax system needs a holistic reform in order to attract investments. In today’s globalized world, the need to keep tax rates competitive cannot be over emphasized because capital is highly mobile. Nigeria income tax rate is high and yet corporate taxes are most harmful to economic growth. In the reforms, company income tax should be reduced and taxes must be harmonized within the federal structure in order to reduce multiplicity of taxes payable by corporate entities.