- Check on exemptions like transfer pricing, base erosion and profit shifting (BEPS), etc
- Widening of the individual tax payers’ base as suggested by Economic survey.
- Implementing the recommendations of the Tax Administration Reform Commission (TARC) to merge CBDT and CBEC.
- Use of PAN, simple laws among others to increase tax buoyancy.
- Attitudinal change in citizens by invoking a sense of duty towards the nation.
- The benefits of Information and Communication Technology (ICT) systems have to be reaped.
- Need for effective dispute settlement mechanism
- Create a special task force to track economic activities that are predominantly settled in cash thus bringing the parallel economy under the tax net
- Monitoring jewelry stores to find people who bought gold without paying taxes
- Political efforts to bring India’s informal sector into the formal sector, leveling the playing field, and increasing total wealth
- Reduce tax rate as India has one of the highest tax rates in the world and thereby preventing tax evasion.
- Focus on widening tax base rather than deepening it
- Simplification of direct tax laws as suggested by the Justice Easwar committee must be looked into. “In the long run, if India is to stay “on the line” as its per capita income grows, it will need to build fiscal capacity,” the Survey said.
- Economic survey has suggested taxing the farm sector.
Conclusion: Nobel-winning economist Joseph Stiglitz summarizes that the optimal tax system would be “progressive income taxes, complemented by indirect taxation, property taxes and capital taxes that enhance the progressivity that can be achieved by the tax system while limiting the level of distortion. India must work towards achieving this ideal.
