ISSN (Online) - 2349-8846

R Kavita RaoSubscribe to RSS - R Kavita Rao

A Confused Taxation Narrative

The Union Budget 2018–19 was presented against the background of a slippage in the fiscal deficit levels. The government has reiterated its commitment towards fiscal consolidation. In this context, an attempt is made to understand the tax revenue numbers for 2017–18 and 2018–19. The analysis suggests potential shortfall in the revenues budgeted for 2018–19.

Estimating Unaccounted Income in India

An alternative methodology to measure the scale of unaccounted income in India (shadow economy) using transport as the universal input is developed. Based on input –output tables and National Accounts Statistics, annual demand for road freight transport is estimated. Correspondingly, annual supply of road freight transport is obtained based on availability of diesel for road freight transport, stock of goods carriages, average freight transport capacity per vehicle, average annual distance travel, and average fuel efficiency per vehicle. The mismatch of supply and demand is broadly considered the unaccounted for portion of the gross domestic product. The methodology is tested for two successive input–output tables and three consecutive financial years. Since the analysis is based on assumptions, a comparative static analysis is carried out to check the sensitivity of estimates to changes in the assumptions.

New Assumptions, New Estimates

The report of the Ministry of Finance Committee, headed by the chief economic adviser, on revenue neutral rates for the goods and services tax provides a new set of estimates. Based on a different set of assumptions, the report suggests that moderate rates of tax are feasible. While this is an attractive conclusion, it is important to scrutinise the assumptions it rests on.

Policy Options for including Petroleum, Natural Gas and Electricity in the Goods and Services Tax

This study analyses the impact of keeping crude petroleum, natural gas, motor spirit (gasoline/petrol), high-speed diesel (diesel), aviation turbine fuel and electricity out of the value-added tax scheme. Specifically, the paper finds that keeping these items out of the input tax credit mechanism (either partially or fully) would result in cascading. Through an input-output framework, this study proposes some alternatives to the proposed design of the Goods and Services Tax and assesses the implications for cascading and prices. It captures the degree of cascading across 48 sectors under different scenarios and explores alternative policy options to phase out under-recoveries of oil marketing companies on account of sales of diesel and petrol under the administered pricing mechanism.

Income Tax Changes

The Union Budget for 2014-15 offered a number of concessions to income taxpayers. But in the interest of rational tax policy reforms, two questions we need to ask are: does changing the exemption threshold for personal income tax affect collections and does a change in savings incentives infl uence saving behaviour?

Revenue Foregone Estimates

For delivering benefi ts to a citizen of the country, the government can choose to adopt an expenditure programme or it can provide a tax concession or exemption. While the former is captured in detail in the budget-making exercise, the latter is not. This is the genesis of the attempts to measure the impact of tax provisions. In India, the government has been publishing a revenue foregone statement since the 2006-07 Union Budget. While there is some discussion on the revenue foregone statement as highlighting the giveaways by the government, this article draws attention to the limitations with the data presented - both in terms of provisions that are included and those that are excluded.

Taxes and Death Are Inevitable, but GAAR Is Avoidable

The report of the committee to review the introduction to the General Anti-Avoidance Rules gives the impression that it fi rst decided on a postponement and then looked for a rationale for the recommended delay. While the report makes a strong case for protecting the interests of foreign investors, it does not clarify how their interests align with those of India. For some reason, the report does not seem to refl ect on the interests of India or even if it does, it assumes that a tax policy which has been drafted in India goes against the interests of India and Indians!

Direct Taxes Code and Taxation of Agricultural Income

Given the pressures on government expenditure and the need to generate additional revenues without generating too many distortions, it is important to bring back to the discussion table the need to deal with taxation of agricultural incomes. The issue has been discussed at length by a number of reports on taxation as well as in the literature on tax policy in India. This paper seeks to reignite this debate at two levels: one by asking for a more comprehensive taxation of incomes, implying thereby taxation of agricultural incomes as well. The second is the need to use current legislation to ensure that the exemption base of agricultural income from taxation is kept as narrow as possible as against expanding it.


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