Tax policies should be non-discriminatory, unless part of a declared discriminatory policy, such as one aimed at discouraging undesirable behaviours.

There is a wider political question about the extent to which it is appropriate for taxation to be used as an instrument of social policy (eg penalising smoking by heavy duties, or imposing environmental taxes to mitigate climate change).

ACCA’s view is that this use of tax by elected governments is legitimate, but such taxes should then meet the other principles, such as being transparent, simple and effective. Governments should be wary of the effect on the complexity of the tax system of too much tinkering to ‘reward’ certain groups of taxpayers.

While the deeper issues of whether neutrality is best served by taxation of income or consumption may never be amenable to definitive resolution, ACCA argues that governments must seek to remove the distortions in their own national tax systems (which also include, for example, tax incentives being given for businesses to structure themselves in a certain way) and work together to try to iron out the differences in tax bases that give rise to tax arbitrage.