That India's tax-GDP ratio is small is no doubt, true. Agriculture cannot get much revenue if it is taxed as it contributes about 20% to the GDP and most of the agriculturists are in dire strait.Almost 60% of the people depend on agriculture and their income is negligible. Yes, service sector contributes more than 50% and it is taxed now. The real problem is not the taxation but spending the tax money.The famous economist, Huge Dalton, ( he resigned as the Chancellor of Exchequer when his tax proposals were published before he could present it to the UK parliament) has said that the problem of public finance is not taxation but of expenditure. The government can always increase taxes, but how it spends it is more important. A recent headline says, 40% of the NREGA (National Rural Employment Guarantee Scheme) is being siphoned off. This is the sad fact of India. Without good governance increasing the tax has no meaning.
A reply sent to Karmayog.
December 26,2009.
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A reply sent to Karmayog.
December 26,2009.
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