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The Tax System in India

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  • Hélène Poirson
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    Abstract

    This paper assesses the effects of India''s tax system on growth, through the level and productivity of private investment. Comparison of India''s indicators of effective tax rates and tax revenue productivity with other countries shows that the Indian tax system is characterized by: (1) a high dependence on indirect taxes, (2) low average effective tax rates and tax productivity, and (3) high marginal effective tax rates and large tax-induced distortions on investment and financing decisions. The paper finds that the most recently proposed package of reforms would improve tax productivity and lower the marginal tax burden and tax-induced distortions. But firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/93.

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    Length: 22
    Date of creation: 01 Apr 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/93

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    Related research

    Keywords: Economic growth; Tax reforms; Indirect taxation; Tax rates; tax system; taxation; tax burden; tax wedge; indirect taxes; effective tax rates; tax productivity; tax administration; tax reform; tax base; tax revenue; tax collections; tax evasion; corporate income tax; tax systems; indirect tax; sales taxes; capital gains tax; excise duties; corporate taxes; tax ratios; tax incentives; tax structure; personal taxes; direct taxes; government tax revenue; marginal tax rates; high tax rates; direct tax; fiscal responsibility; fiscal policy; sales tax; tax policy; tax payments; taxation of capital income; budget management; fiscal adjustment; corporate tax rate; tax revenues; tax planning; state taxes; taxes on capital; consumption taxes; large taxpayers; local taxes; high tax burden; tax return; dividend taxation; tax exemption; tax wedge on labor; consumption tax; domestic indirect taxes; taxable income; taxpayer units; government revenue; fiscal affairs department; tax competition; tax receipts; tax withholding; taxes on property; expansionary ? fiscal; marginal tax rate; large taxpayer units; tax services; individual income tax; tariff rates; fiscal affairs; indirect tax bases; labor taxes; property taxes; tariff reduction; excise duty; taxes on income; tax rates on capital; capital structure; tax bases; tariff structure; payroll taxes; income taxes; tax measures; tax sales; tax on wages; cost of taxation; direct taxation; domestic taxes; personal income tax;

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    1. Howell H. Zee & Vito Tanzi, 1998. "Taxation and the Household Saving Rate," IMF Working Papers 98/36, International Monetary Fund.
    2. Blankenau, William F. & Simpson, Nicole B., 2004. "Public education expenditures and growth," Journal of Development Economics, Elsevier, Elsevier, vol. 73(2), pages 583-605, April.
    3. Milesi-Ferretti, Gian Maria & Roubini, Nouriel, 1998. "Growth Effects of Income and Consumption Taxes," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 30(4), pages 721-44, November.
    4. Gian Maria Milesi-Ferretti & Nouriel Roubini, 1995. "Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 95-18, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
    6. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow Economies around the World: What Do We Know?," CESifo Working Paper Series 1167, CESifo Group Munich.
    7. Vito Tanzi & Howell H. Zee, 2000. "Taxation and the household saving rate: evidence from OECD countries," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, Banca Nazionale del Lavoro, vol. 53(212), pages 31-43.
    8. Nicodeme, Gaetan, 2002. "Sector and size effects on effective corporate taxation," MPRA Paper 15781, University Library of Munich, Germany.
    9. Thomas Dalsgaard, 2001. "The Tax System in New Zealand: An Appraisal and Options for Change," OECD Economics Department Working Papers 281, OECD Publishing.
    10. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1681, C.E.P.R. Discussion Papers.
    11. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
    12. Feltenstein, Andrew & Shah, Anwar, 1995. "General equilibrium effects of investment incentives in Mexico," Journal of Development Economics, Elsevier, Elsevier, vol. 46(2), pages 253-269, April.
    13. Fisman, Raymond & Svensson, Jakob, 2000. "Are corruption and taxation really harmful to growth? - firm-level evidence," Policy Research Working Paper Series 2485, The World Bank.
    14. David Carey & Josette Rabesona, 2002. "Tax Ratios on Labour and Capital Income and on Consumption," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2002(2), pages 129-174.
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    Cited by:
    1. Гарабед Минасян, 2007. "Стратегически Елементи На Макроикономическата Политика В България," ERI-BAS Chapters, Bulgarian Academy of Sciences - Economic Research Institute, in: Митко Димитров (ed.), Студии за ускорено развитие на българската икономика, edition 1, chapter 1, pages 31-61 Bulgarian Academy of Sciences - Economic Research Institute.
    2. International Monetary Fund, 2008. "Current and Proposed Non-Oil Tax System in Azerbaijan," IMF Working Papers 08/225, International Monetary Fund.
    3. C Niranjan Rao, 2008. "The Role of Intellectual Property Rights in Information and Communication Technologies," Working Papers id:1742, eSocialSciences.
    4. Jahangir Aziz, 2008. "Deconstructing China’s and India’s Growth: The Role of Financial Policies," Working Papers id:1714, eSocialSciences.
    5. Jahangir Aziz, 2008. "Real and Financial Sector Linkages in China and India," IMF Working Papers 08/95, International Monetary Fund.
    6. Jose Daniel Rodríguez-Delgado, 2007. "Safta," IMF Working Papers 07/23, International Monetary Fund.
    7. Muller, Nichole, 2007. "Indisches Recht mit Schwerpunkt auf gewerblichem Rechtsschutz im Rahmen eines Projektgeschäfts in Indien
      [Indian law with emphasis on commercial legal insurance within the scope of a project busin
      ," MPRA Paper 6809, University Library of Munich, Germany.

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