As a number of earning individuals in the country are very less in the tax net, the Government in its pre-Budget Economic Survey 2015-16 has suggested that India needs to increase its tax-gross domestic product (GDP) ratio in order to bridge the gap to cover to become a full tax-paying democracy.
Arguing further, it has also said to spend more on health and education as well. “As per the statistics, country’s tax to GDP ratio is at 16.6 per cent and is well below the emerging market economy (EME) and Organisation for Economic Co-operation and Development (OECD) averages of about 21 per cent and 34 per cent respectively,” said the report which was tabled by Finance Minister Arun Jaitley in Parliament on Friday.
In India, it has been observed that many earning professionals, be it a Government employee or working in private firm or doing own business, are not paying taxes as per the Government norms which are mandatory. In a move to bring them in tax net, the Survey has suggested to increase the tax-GDP ratio.
Pointing out that in India, roughly 5.5 per cent of earning individuals are in the tax net, the survey also gives an idea of the gap that the country needs to cover to become a full tax-paying democracy. “Taxes and expenditures should be viewed not just from a fiscal but also from an institutional perspective,” it added.
For that reason, the survey noted that the implementation of the Goods and Services Tax (GST), while highly desirable and necessary, will have limited impact in furthering the broader objective of citizen participation, state building and democratic accountability.
“India’s overall tax to GDP is about 5.4 percentage points less than that of comparable countries. India spends on an average about 3.4 percentage points less vis-a-vis comparable countries on health and education”.
In a separate chapter, the survey said till December 31, 2015, a total of 112.82 lakh subscribers inclusive of Atal Pension Yojana have been enrolled under National Pension Scheme.