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The Tax System in India: Could Reform Spur Growth?

Author/Editor: Poirson, Hélène
Authorized for Distribution: April 1, 2006
Electronic Access: Free Full Text (PDF file size is 492KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper assesses the effects of India's tax system on growth, through the level and productivity of private investment. Comparison of India's indicators of effective tax rates and tax revenue productivity with other countries shows that the Indian tax system is characterized by: (1) a high dependence on indirect taxes, (2) low average effective tax rates and tax productivity, and (3) high marginal effective tax rates and large tax-induced distortions on investment and financing decisions. The paper finds that the most recently proposed package of reforms would improve tax productivity and lower the marginal tax burden and tax-induced distortions. But firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates.
 
Series: Working Paper No. 06/93
Subject(s): Economic growth | India | Tax policy | Tax reforms | Indirect taxation | Tax rates
Author's keyword(s): Growth | tax policy | tax reform
 
English  
    Published:   April 1, 2006        
    ISBN/ISSN:   0 / 1934-7073   Format:   Paper
    Stock No:   WPIEA2006093   Pages:   22
    Price:   US$15.00
       
     
Please address any questions about this title to publications@imf.org.