Sunday, November 9, 2014

Tax reform in India The truck stops here

The article goes into detail regarding the issues regarding an indirect tax reform system. It shows that India has had problems implementing a free trade agreement with itself and even that so for years. A recent World Bank report shed light on how corruption in India's bureaucracy system has lead to its long distance truckers to be parked 60% of their time. A recent proposal to harmonize the system has been has been introduced in a form of a goods and services tax (GST). This proposal has been around since 2007, but the recent regime change has made it a center piece for moving forward. 
A well designed GST would essentially give a boost to manufacturing and limit corruption and furthermore make India a true common market. A sin charge of extra tax on Alcohol petrol and tobacco would be implemented. In terms of politics the government must secure an agreement of 29 states to implement a common rate. The states must essentially give up their power on implementing taxes. Many worry about the loss of income as indirect taxes are a big chunk of state revenue. But in terms of exceptions many worry if too many are made the GST might just become the new solution with a mere different name. 

Source:
http://www.economist.com/news/finance-and-economics/21631147-fix-indias-indirect-tax-system-overdue-it-may-fall-short

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