In the context of evaluating a good tax system, what does 'economy' refer to?

• A. Minimizing the administrative and compliance costs of collecting taxes.
• B. Promoting fairness in the distribution of tax burdens.
• C. Maximizing government revenue regardless of cost.
• D. Ensuring that taxes do not distort consumer choices.

Answer: (A)

Verified step by step guidance

1. Understand that in the context of evaluating a good tax system, 'economy' refers to the efficiency aspect related to the costs involved in tax collection.
2. Recognize that 'economy' does not mean maximizing government revenue regardless of cost, but rather minimizing the resources spent on administering and complying with the tax system.
3. Identify that administrative costs are the expenses borne by the government to collect taxes, while compliance costs are the costs incurred by taxpayers to comply with tax laws.
4. Conclude that a tax system with good 'economy' aims to reduce both administrative and compliance costs to make tax collection as cost-effective as possible.
5. Therefore, 'economy' in tax evaluation means minimizing the administrative and compliance costs of collecting taxes.