India To make India a developed economy by 2047, India will have to work on taxes. Tax rates will have to be reduced by changing the approach to tax assessment. Along with this, there is a need to increase tax revenue by increasing the base. Experts have said this. They underlined the need to move from tax rates to revenue, focusing on reducing tax rates, increasing the tax payment base and thus creating a means to fund India’s investment and development needs.
Tax evasion is also a big challenge
Sudhir Kapadia, Senior Partner, EY India, said, “Traditional high tax rates have not resulted in significant tax buoyancy. Given this fact, governments in India since 1991 have clearly advocated moderate tax rates, which promote greater transparency and compliance.” Kaushik Dutta, Director, Thought Arbitrage Research Institute, said at a seminar organised by Think Change Forum that India’s tax-gross domestic product (GDP) ratio is influenced by the presence of a thriving unorganised sector, which still contributes 30 to 35 per cent to the economy. Dutta said, “A simpler GST regime will enable them to join the formal economy, take ‘input tax credit’ and become competitive. Tax evasion is also a big challenge along with classification issues. Another area where GST has not been successful is e-commerce. There are challenges and they need to be addressed.”
Increasing the tax-GDP ratio should be a priority
Pulin B. Nayak of the Centre for Development Economics said, “India is still in the group of developing economies. There are fewer income tax payers due to low per capita income. Keeping tax rates too high is also an inappropriate idea as it will encourage tax evasion.” Nayak said that increasing the tax-GDP ratio should be a great priority as it will enable the government to spend on public goods, infrastructure and social sector. Ranganath Tannir, general secretary of Think Change Forum, also expressed similar views and said that reform in taxation is the need of the hour. The government should consider reducing tax rates and increasing the taxpayer base as soon as possible.
(With inputs from PTI)
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