India is a country that runs on a diversified portfolio. The trajectory of India’s economy is shaped by the combination of different factors, highlighting the importance of a holistic policy framework. Counting in agriculture, banking, natural resources and transportation infrastructure, and Service rendering sector along with a major contribution from IT are a few of the major factors that needs immediate attention.
In India, we have a tax system which is highly complex, with multiple layers of taxes at the central, state, and local levels. This complexity increases compliance costs for taxpayers and creates administrative challenges for tax authorities. Our is a very complex tax collection system which also leads to interpretational dependency. Tax laws and regulations in India are often ambiguous and subject to interpretation, leading to disputes between taxpayers and tax authorities. Uncertainty regarding tax liabilities can deter investment and business activities.
Addressing the concern of lack of clarity and certainty in the tax policy require our government’s efforts to simplify tax laws, provide clear guidelines to enhance transparency and consistency in tax administration, and engage stakeholder’s opinions in the policymaking process. Having a stable and predictable tax regime fosters a favourable business environment. It encourages investment, promotes economic growth, and strengthens taxpayer compliance.
Uncertainty in the tax policies distorts the resource allocation decisions by businesses and individuals. Investors require predictability and stability in tax laws to make informed investment decisions and assess their tax liabilities accurately. Uncertain tax policies create risks and uncertainties, reducing investor confidence and competitiveness.
Ambiguous tax laws and inconsistent interpretations often result in disputes and litigation between taxpayers and tax authorities. Tax disputes can drag on for years, leading to legal costs, administrative burdens, and uncertainty regarding tax liabilities, negatively impacting business operations and investor confidence.
Call to action: We need our education system to train new budding professionals to manage and understand the tax system. The government can work on better articulating policy terms and tax parameters should be well defined and balanced. A single tax system can be built for respective industries to eliminate layered tax systems. The tax system should operate as an independent body without any interference. Tax should be reconsidered for a reasonable share of one’s income. Harmonising Indirect Taxes, Facilitating Ease of Doing Business, Promoting Transparency and Accountability of tax, and Rationalizing Tax Incentives and Exemptions can improve taxpayer’s trust and willingness to participate.
