The Indian finance ministry yesterday released its 'Direct Tax Code 2009' (DTC), a proposal paper on simplifying India's complicated tax structure as also to bringing down overall taxes - both with a view to improve compliance and thereby improve the government's tax revenues.
Given that the media has covered most aspects of the tax proposals on companies and individuals, we will leave it at that. Our question is - what's the priority for you, the tax payer. Do you want lower taxes as the ministry has now proposed? Or are you willing to accept higher taxes, provided the government utilises the income so generated in a proper manner?
See, the Indian government anyways has no point in worrying about you, the individual taxpayer (who is in the minority). This is because elections here are decided by agriculturists, whose farm incomes are tax exempt. Then, high levels of poverty and tax evasion keeps the other majority outside the direct tax net. So, it is unlikely that aam aadmi will be a government priority when it comes to tax reforms. People like us want proper service deliveries from the government, whether it is on the healthcare front, or electricity and water supply, or even security.
With so much corruption inherent in the government machinery, even the simplified tax rules will be twisted and therefore compliance will remain a major issue in
India lags its emerging market peers like Brazil and Russia, and even the US and world average, when it comes to the government's tax to GDP ratio. This tells the story that despite one of the highest tax rates and amongst the most complex tax structure in the world, how a notoriously corrupt and poor tax-collection system has spoiled matters. So, will the government's new tax code really work is worth questioning!
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