Column: Focus on GST and DTC first

Jan 17 2013, 03:09 IST
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SummarySince the rich save more, a higher tax on them will have implications in terms of overall savings levels.

state of tax administration in India, and several routes of tax avoidance and evasion, introduction of a higher top tax rate could actually prove to be counterproductive. Plugging the loopholes in the tax system is a prerequisite to better tax buoyancy and tax compliance. This will, however, require strong political will to reform the domestic compliance machinery, and to rally international cooperation to eliminate tax avoidance opportunities.

The government should focus on implementing the DTC and GST in the upcoming Budget. These comprehensive direct and indirect tax reforms will bring about the required structural changes in the current revenue-generation model of the government. Ad hoc measures, such as higher taxes on the super-rich, can wait.

The author is assistant professor, Indian Institute of Management, Ranchi. Views are personal. He can be reached at amarendu@iimranchi.ac.in

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