ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Globalisation and Federalism: Uneasy Partners?

Federalism faces difficult challenges in the era of globalisation, since the latter has generated pressures for reform in economic and political organisations and thereby in inter-governmental relations of all developing countries as well. There are forces in inter-governmental relations pulling in opposite directions, some tending to centralise functions of second tier governments, such as of the states in India, and others moving to decentralise to tiers further down, citing "subsidiarity". Although, globalisation at one level has given some functional autonomy for efficiency gain and competition and to attract private capital, it has restricted the scope for independent sub-state level fiscal policy. The biggest challenge for federalism in the coming years would be to respect the plurality of identity of human beings.

International Lessons in Goods and Services Tax

Goods and Services Tax Amaresh Bagchi lessons for all engaged or interested in introducing VAT in a country or putting it in a better shape where it is already in operation in some form. While not attempting to summarise all that it contains, the paragraphs that follow seek to provide a flavour of the ideas thrown up by the au The two outstanding developments in the tax field in the 20th century have been the emergence of income tax in the first half and the value added tax (VAT) in the second half as the preferred instrument of taxation across the world. Income tax was in the making for over a 100 years. The ascent of VAT in just 50 years beginning with France replacing its turnover tax with a tax on value added in the mid-1950s has been truly remarkable. With the European Commission (now European Union, the EU) in the lead, the tax spread rapidly

Role of Planning and the Planning Commission in the New Indian Economy: Case for a Review

Is there a case for continuing with planning and persisting with practices that on the face of it seem to be irrelevant? This article draws attention to the need to define the role of planning and the Planning Commission in the economy post-liberalisation with greater clarity and to reform the institutions that are supposed to support the planning process to make them relevant and effective. With control over investment in the private sector beyond the purview of the Planning Commission, development planning can at best be indicative.

Dividend Taxation Revisited

This article first argues why independent taxation of corporate profits and dividend incomes has ill-effects on equity and efficiency and then considers the merits and drawbacks of tax alternatives. In the light of studies conducted in the US after the enactment of the 2003 legislation on dividends, it puts forward suggestions to address the problems with the Indian approach to dividend taxation.

Rethinking Tax Treatment of Capital Gains from Securities

In July 2004, the United Progressive Alliance government removed long-term capital gains tax and introduced a tax on transactions. There are good reasons - on grounds of revenue, efficiency and equity - to reconsider the abolition of the capital gains tax.

India's Fiscal Management Post-Liberalisation

An exclusive focus on deficit reduction has had the adverse fallout for public spending on health and education in several states, forcing a shrinkage of the public sector's involvement in the social sector. Policy-makers are now seeking an escape route by getting the fiscal and revenue deficit targets relaxed. While there can be valid arguments against inflexible targets, abandoning the discipline underlying fiscal responsibility legislation, as has been suggested, is questionable. For, at base, the fiscal problems of democracies have their origin in the short time horizon of governments and their penchant for promising the moon to the electorate while showing an extreme reluctance to tax.

Towards GST: Choices and Trade-offs

What kind of Goods and Services Tax is under contemplation? Will it only replace CENVAT and the service taxes levied by the centre, leaving, the state VATs untouched? Or will it also displace the VATs now being levied by the states? These are important issues which have a vital bearing not only on the shape of trade taxation in the country but also on the federal structure of the polity envisaged in the Constitution and call for a more careful consideration than has taken place, so that choices are made with a clear-eyed view of the trade-offs.

Symposium on Report of Twelfth Finance Commission

The Twelfth Finance Commission has broken new ground in several key areas and made recommendations which, if fully implemented, will have a far-reaching impact on the finances and functioning of government in the country at all levels. In order that the issues raised by the TFC report are debated in a wider forum, the EPW invited some of the leading scholars in the field to join in a symposium by contributing papers to this special issue. An overview of the papers and the issues is presented in this introductory article.

VAT and State Autonomy

It is inappropriate to impose a uniform tax structure in VAT on the states for it goes against the principles of fiscal autonomy. It is a pity that erosion of the federal foundations of the polity is taking place at a time when there is need to strengthen them. Any thing that hurts India?s federalism should be jealously guarded against. One wonders whether the states while surrendering the most vital part of their fiscal autonomy thought through the implications of what they were agreeing to.

Towards a Rational System of Centre-State Revenue Transfers

Rationalisation of the transfer system and restoration of fiscal balance in the states will not be possible without a radical review of the practice of planning, plan financing and central assistance for state plans. While determining revenue needs of the states normatively, it is necessary to take a holistic view and do away with the plan and non-plan distinction in revenue expenditures, which is a source of other distortions in expenditure priorities. Until that happens, rationalisation of the transfer system will not be possible.

Taxing Services

Services now account for the largest share in the GDP and the case for service taxation is well established. Is the evolution of the structure of taxation of services on the right track? What are the important issues?

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