Another disturbing fact is that revenue forgone as a percentage of total tax collection has been increasing over the years. Even if half of the tax revenue is forgone presently because of the plethora of exemptions in the Central Government tax system get collected, it would generate additional tax revenue worth 3 per cent of GDP.
Consider this, they suggested, against the required additional spending of around 2.5 % of GDP on Education, 2 % on Health, 1 % on Food Security, 2 % on Universal Old Age Pension and around 1 % for Water and Sanitation, the government needs to restructure its revenue allocation parameters as also revenue mobilisation policy to raise additional revenues amounting to around 8.5 % of GDP. It should therefore, be stressed that additional revenue needs to be mobilised through progressive Direct taxes rather than charging the poor heavily on Indirect Taxes, reported The Times of India.
They expressed concern that India, facing unprecedented inequity in violation of Article 39 (c) of the Directive Principles in the Indian Constitution needs a radical transformation in its budget preparation, process as well as content and the fiscal policy and fiscal governance.
While the intervention into fiscal policy, by the non-governmental, non-corporate organizations and through those or otherwise, by the common people and their representatives has been shrinking in the neo-liberal era; on the other hand, the corporate alliances such as FICCI and CII, as also the IFIs have become much more influential than ever before. In this context, therefore, we must produce and present an alternative framework, challenging even the basics of the budgeting including allocation of resources and taxing proposals towards directing and monitoring role of the State as a capital collector and investor with equity and justice as the goals.
In order that there is no ‘Exclusive growth’ furthered and the ‘Sovereign India’ indeed makes its economy self reliant at all levels- local to national, a transformation towards a truly ‘national’ budget is a must. With the politicians eyeing on 2014, let the common citizens judge the UPA and all in the opposition with their approach to Resource mobilization and Resource allocation through budgeting as a major exercise for the same, they added.
According to them, the extent of government intervention on Revenue side is much less in India, than that in most developed countries and developing countries, primarily because of India’s low level of tax-GDP ratio. With a Tax-GDP ratio at 16.4 %, India makes a peculiar case, as even lower middle income countries (LMIC) are found to have tax-GDP ratio as high as 17.7 %, the country’s tax-GDP ratio needs to be stepped up significantly in the coming years.
They lamented that India’s tax system lacks progressivity also as it relies heavily on indirect taxes and much less on direct taxes. With direct tax share of 37.7 % in total taxes, India’s tax structure is not progressive at all.Hence, the government should focus on improving the country’s tax revenue collection from proper implementation of the existing direct taxes and progressive reforms in the direct tax regime instead of increasing its reliance on indirect taxes.
Stating that Increasing Direct Taxes has an enormous scope, they said that what we need is Amiri Rekha, not Garibi Rekha ! Even if we consider 50 lakh per capita as the valuation cut-off of property to be taxed, it will be not more than a few lakh persons in the country who will be directly taxed and the receipts to make GDP will be multiplied. This can on the other hand, help the state waive a number os taxes to a large population of common people in this country. It may be noted that there are not more than 55 billionaires and 1.5 lakhs millionaires in this country and large number of ministers and MPs are crorepatis, why not tax them making majority of toilers tax free?
They felt that there is an urgent need to plug loopholes in India-Mauritius Double Tax Avoidance Agreement (DTAA) and other similar DTAAs, which are used for ‘treaty shopping’ by MNCs and evading taxes.
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