## The Tax System in India: Could Reform Spur Growth?

_IMF Working Papers, April 1, 2006_

## Source details

**Canonical URL:** [The Tax System in India: Could Reform Spur Growth?](https://www.imf.org/en/publications/wp/issues/2016/12/31/the-tax-system-in-india-could-reform-spur-growth-19057)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/the-tax-system-in-india-could-reform-spur-growth-19057/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/the-tax-system-in-india-could-reform-spur-growth-19057/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/the-tax-system-in-india-could-reform-spur-growth-19057/bundle-manifest.json)

## Bibliographic details
- Authors: Hélène Poirson
- Published: April 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863536.001

---

### Summary
- This paper assesses the effects of India's tax system on growth through the level and productivity of private investment.
- The paper compares India's indicators of effective tax rates and tax revenue productivity with other countries.
- 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.
- Caveat: firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates.

### Key findings on tax structure and performance
- 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.
- Subject coverage: Consumption taxes, Corporate income tax, Income and capital gains taxes, Income tax systems, Revenue administration.
- Keywords highlighted: excise, firm, tax burden, tax rate, VAT, WP.

### Effects of proposed reforms
- The most recently proposed package of reforms would:
  - improve tax productivity, and
  - lower the marginal tax burden and tax-induced distortions.
- Remaining limitations after reforms:
  - Firms relying on internal funds or facing borrowing constraints would still face high marginal tax rates.

---

## Content in this bundle

- **Wp0693**
  - [Wp0693 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0693.pdf.md){rel="alternate" type="text/markdown"}
  - [Wp0693 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0693.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-tax-system-in-india-could-reform-spur-growth-19057_