Ramsey Rule:

Ramsey rule (1927) requires that the optimal set of commodity taxes leads to an equal percentage reduction in the compensated demands for all goods and factors. Recall that compensated demand for a good is derived by keeping utility constant consequent upon a price change and assessing how demand changes with a change in the relative price only. Compensated demand  therefore captures only one component of price effect, i.e., the substitution effect as the concern of the theory of optimal taxation pertains to excess burden. By way of clarification, since optimality pertains to allocation in terms of quantities, Ramsey rule  demands "equal-percentage- change" in the quantities of each good (or factor) rather than equal percentage change in the prices as implied by uniform taxation.

Ramsey (1927) showed that a uniform commodity tax system, which does not change the relative prices is, in fact, rarely optimal.  It may appear that taxing goods and services at a uniform rate would be optimal, as relative prices remain unchanged. However, this is just a tax on income as real incomes falls with the rise in nominal price level on account of a rise in prices of all goods and services  rise by the same magnitude. Uniform set of taxes may therefore appeal to the policy makers apparently because relative prices remain unchanged and optimal decisions are satisfied. But ultimately it is the price - induced change in demand which matters. So,  imposing a uniform rate of tax on a good whose compensated demand is relatively elastic would generate less revenue as well as greater inefficiency as demand changes relatively more.