Answer of the day-Taxpayer

Only 1.5% of Indian pay income tax. What is the reason for same. How can we improve the situation?(12.5 marks)

   India with a population of 1.2 Billion and GDP of  has just 1.5% of population as the tax payer. Tax which is a part of people contribution toward countries development is the way through which government operate financially. But around 1.7 crore of total 4.6 crore people employed in formal sector and out of 5.5 crore of informal enterprise only 1.8 crore filled income tax. Such situation is due to following reasons.

1.Basic Service provided by Govt is lacking in the form of Health facilities, education, transportation etc --as per Economic Survey--which make it difficult for esp middle class to pay taxation for the development of country

2.Red tapism---in the form of harrasment of tax payer by official due to various obsolete procedure, less clearity regarding the ways etc

3.Various tax exemption in the form of corporate tax exemption, security transaction tax exemption etc which make it difficult for the people to respond toward tax paying

4.More emphasis on Indirect taxation-In India ratio is as 67:33 for Indirect:Direct tax.----thus making it regressive taxation which hinder growth of tax collection

5.Less punishment for not paying tax----thus people avoid paying it

6.Black Economy--of around 20-60% according to various estimates which make it outside the formal economy thus no contribution to taxes from this sector.

7.Chalta Hai attitude--- That its fine if we are not paying taxes

8.more than 90% of people are employed in informal sector thus difficult to track their income

9.unequal growth of economy with majority not getting the development benefit

10.tax exemption to agriculture sector.

11.corruption among lower official which make it easy for people to evade taxes.

Way to improve the scenario

1.Simplification of taxation rule using technology and makinv online submission easy. Also increasing awareness regarding same

2.Digital economy push thus bringing more informal sector into formal and thus increasing tax base

3.more push on direct tax expansion rather than just indirect thus making overall taxation system more progressive rathwr than regressive.

4.removing various exemption and thus making taxation more simplified and easy for people to respond to it

5.Training of tax official to behave as facilitator not as regulator.

6.making agriculture income taxable for big farmers

7.emphasis on inclusive growth

8.providing basix service in the form of quality health care, education and social security benefit as country grows.

India's tax collection have increased though not much increase in tax payer. We can follow above steps to increase tax payers and thus helping the development of the country.