True, The India spends too little on Education, as well as on Health. But overall, it seems to me that besides the fact that India’s tax to GDP ratio is very low, India is suffering due to two consequences of its taxation policy. First, in proportion to its GDP, India taxes its citizens much lower, compared to identical economies. Secondly, India’s taxes are collected through largely indirect rather than organic direct means, in which collection is rendered indefinitive. A similar argument was made by renowned French economist Piketty in his last visit to India.
wow. that is interesting comment. So being very populous contry -it is obviously difficult to bring masses into direct tax net. Therefore, increasing indirect taxes is what GOI is doing. Am I right??
That is true @renutyagi, but you see the problem with indirect taxes is their in-discriminatory , and/or blanket nature. The indirect tax levied on sugar for instance, does not discriminate between the poor and the rich and applies to all. So besides the skewedness in collection , such indirect taxes tend to exonerate the rich. This is because in setting those taxes, the GOI is forced to try and achieve amounts manageable by the poor. As such, the compromise amount is often much lower for the rich. In the end, the rich who should otherwise pay more, end up paying little, and below their manageable level. (cue this: You cannot tax sugar in such a manner that the rich and poor buy it at different rates!). on the other hand, direct taxes are specific, and ensure that societal clusters are taxed in accordance with their enterprise. Overall, the GOI should consider putting in place policy reforms promoting direct taxes
True, The India spends too little on Education, as well as on Health. But overall, it seems to me that besides the fact that India’s tax to GDP ratio is very low, India is suffering due to two consequences of its taxation policy. First, in proportion to its GDP, India taxes its citizens much lower, compared to identical economies. Secondly, India’s taxes are collected through largely indirect rather than organic direct means, in which collection is rendered indefinitive. A similar argument was made by renowned French economist Piketty in his last visit to India.
wow. that is interesting comment. So being very populous contry -it is obviously difficult to bring masses into direct tax net. Therefore, increasing indirect taxes is what GOI is doing. Am I right??
That is true @renutyagi, but you see the problem with indirect taxes is their in-discriminatory , and/or blanket nature. The indirect tax levied on sugar for instance, does not discriminate between the poor and the rich and applies to all. So besides the skewedness in collection , such indirect taxes tend to exonerate the rich. This is because in setting those taxes, the GOI is forced to try and achieve amounts manageable by the poor. As such, the compromise amount is often much lower for the rich. In the end, the rich who should otherwise pay more, end up paying little, and below their manageable level. (cue this: You cannot tax sugar in such a manner that the rich and poor buy it at different rates!). on the other hand, direct taxes are specific, and ensure that societal clusters are taxed in accordance with their enterprise. Overall, the GOI should consider putting in place policy reforms promoting direct taxes