India needs to shift the taxation focus to become a developed economy with a USD 25 trillion GDP by 2047, say experts at Think Change Forum roundtable on Accelerating India’s Growth
FinTech BizNews Service
Mumbai, 13 June 2024: Think Change Forum (TCF), an independent think tank dedicated to generating new ideas and finding solutions for navigating through a new changing world organized a panel discussion on “A Progressive Taxation Ideology to Accelerate India’s Path to Becoming a Developed Country” at the India Habitat Centre, New Delhi. Experts in the event stressed on the need for a shift in the taxation mindset from Rates to Revenue for India to become a developed economy with a USD 25 trillion GDP by 2047.
The speakers and the panelists focused on the fact that because of its huge population, India can maintain a low tax to GDP ratio and still collect robust taxes to make the transition from being a large economy to a truly developed one. Another key element is the inclusion of the informal economy in the tax net, which as per Think Change Forum estimates lies in the range of 30 percent to 35 percent. The emphasis on the need for a new taxation ideology during the discussion to make the transition from rates to revenue focused on lowering tax rates, enlarging the tax paying base and thereby creating the means for financing of India’s investment and development needs.
The event featured an address on Growth Enablers for the Indian Economy by Mr. Sudhir Kapadia, Sr. Partner, EY India. Mr. Kaushik Dutta, Co-Founding Director, Thought Arbitrage Research Institute gave a perspective on Indirect Taxes. These addresses were followed by the panel discussion which had the following eminent panellists: Prof. Manoj Pant, Ex Director, Indian Institute of Foreign Trade & Expert in International Trade; Mr. Rajat Mohan, Executive Director – GST, MOORE Singhi; Dr. Pulin B Nayak, Centre for Development Economics, Delhi School of Economics and Mr. Yogendra Kapoor, Chartered Accountant and a renowned economy, business & tax commentator.
In his address, Mr. Sudhir Kapadia, Sr. Partner, EY India, said, “Conventional higher tax rates haven’t resulted in significant tax buoyancy. Recognising this fact, governments in India since 1991 onwards have clearly batted for moderate tax rates leading to greater levels of transparency and compliance. Going forward, it needs to be seen how much fiscal space governments will have to further lower tax rates from current levels. This is especially so as demands on government spending especially in physical and social infrastructure continues unabated to enable meeting high economic growth targets. This is the delicate balancing act which governments will have to grapple with. Time has come to bite the bullet for reforms in direct taxes. There could be one simplified rate structure for businesses and for individuals, there could be one simple three rate structure with low / moderate rates, no surcharges and cesses and no significant deductions.”
“On GST, a lot has been spoken about the rates and clearly it is time to have a far lower number of rates in GST structure. It is also time to ensure we do not have constraints related to availing of input tax credits. There has been a steady increase in income tax revenues but we need to have continued focus on taxpayer experience with tax administration, and ensure the filing process remains seamless and hassle-free,” Sudhir Kapadia added.
The discussion in the event made a case for a wider tax base leading to more revenue collections. Under GST, taxpayers increased from 60 lakh in 2017 to 1.40 crore in 2023 with over 114 crore returns reported to be filed till June 2023. This depicts that a wider tax base leads to more collection.
The event suggested 5 bold reforms to accelerate India’s financial position and strengthen its ability which will act as a force multiplier to the new taxation ideology of reducing taxes and enhancing the base. These reforms will leverage the country’s economic resources toward development without reliance on high taxes, external investments or borrowings:
In his address on Indirect Taxes, Mr. Kaushik Dutta, Co-Founding Director, Thought Arbitrage Research Institute, said, “Though GST has brought significant improvements in our taxation system, in penetration, total collection, buoyancy, reduction of time in movement through e way bills, high use of technology etc. but several issues persist to make it a truly world class tax mechanism including multiple rates and operational challenges like businesses needing to register across states, posing logistical hurdles. Illicit markets further exacerbate these challenges by causing substantial revenue losses for the government due to unreported transactions and tax evasion. This not only distorts market prices, but also harms compliant businesses.”
“Tax to GDP ratio cannot significantly go up and that needs a big ideological change. India’s tax to GDP ratio suffers from the presence of a thriving informal sector, which still accounts for 30% to 35% of the economy. A simplified GST regime will enable them to join the formal economy, take input tax credits, and become competitive. Tax evasion continues to be a big challenge along with classification issues. The inverted duty structure is also an impediment. Another area that GST has not been able to crack is e-commerce. So, there are challenges and they need to be addressed,” Kaushik Dutta added.
In his Welcome Address, Mr. Ranganath Tannir, General Secretary, Think Change Forum said, “Given the emerging position of India in the world order, all stakeholders must work towards one single goal – to make India a developed country by 2047. We need bold decisions and fresh ideas to make this happen, such as reforming our taxation ideology to lower tax rates and increasing the base of taxpayers, without focusing on improving the tax-GDP ratio. Such restructuring will encourage more business activities and individuals to contribute and join the formal economy.”
