Reforms in Direct Tax Administration in India (1991–2016)
| Author | Parul Jain,Anil Kumar Jain |
| DOI | 10.1177/0019556120921837 |
| Published date | 01 June 2020 |
| Date | 01 June 2020 |
Reforms in Direct Tax
Administration in India
(1991–2016)
Parul Jain1 and Anil Kumar Jain2
Abstract
Tax policy and tax administration are inextricably linked. The success of any tax
policy depends to a large extent on efficient tax administration which would
necessitate minimising arrears of assessment and collection, pendency of appeals,
tax avoidance and tax evasion and improve taxpayers’ compliance. Despite
increased collections, the prevailing system of direct taxes is beset with problem
of increasing arrears of assessments and collections, pendency of appeals, delays
in refunds and mounting tax evasion. Collection of every tax involves some
money cost for the government and compliance cost (both in money and in real
terms) for the taxpayers. It is desirable that these costs should be minimised.
However, minimising the cost of collection does not mean that administrative
staff should be kept at minimum. On the contrary, it is desirable that administra-
tive strength of the Department should be considerably increased. Stress should
be laid on effective and efficient administration.
Keywords
Tax reforms, tax administration, voluntary compliance, tax evasion/black money
Introduction
In 1991, the Government of India had initiated the first round of reforms to rescue
the Indian economy from an unprecedented balance of payment crisis and fiscal
indiscipline. A two-stage downward adjustment in the value of Indian Rupee
against the US dollar was made and trade policy reforms abolished all export
subsidies and promised current account convertibility of the Indian currency in
about 2 years. Subsequently, government pronounced liberalisation of Industrial
Policy, reforms in financial sector and action for fiscal consolidation. Successive
Article
Indian Journal of Public
Administration
66(2) 219–239, 2020
© 2020 IIPA
Reprints and permissions:
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DOI: 10.1177/0019556120921837
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1 Department of Economics, DAV P. G. College, Varanasi, Uttar Pradesh, India.
2 Former Professor & Head, Department of Economics & Former Dean, Faculty of Social Sciences,
Banaras Hindu University, Varanasi, Uttar Pradesh, India.
Corresponding author:
Parul Jain, Department of Economics, DAV P. G. College, Varanasi, Uttar Pradesh 221001, India.
E-mail: ms_parulj@rediffmail.com
220Indian Journal of Public Administration 66(2)
governments sought to deal with the problems of deficits through increased tax
revenue, expenditure management, etc. The government’s fiscal deficit has been
kept under reasonable control and reached a record low of 2.5 per cent of GDP in
2007–2008. Due to impact of financial meltdown, the fiscal deficit reached 6.5
per cent of GDP in 2009–2010 but subsequently fiscal discipline imposed by gov-
ernments brought down the deficit to 3.9 per cent of GDP in 2015–2016. India
stands on a different footing today on account of different measures undertaken
by the successive governments.
Tax Reforms
Tax reforms in post-1991 era have largely been guided by the recommendations
of Tax Reforms Committee (1991, 1992 and 1993, Chairman: Raja J. Chelliah),
Advisory Group on Tax Policy and Tax Administration for the Tenth Plan (2001,
Chairman: Parthasarathi Shome), Report of the Task Force on Direct and Indirect
Taxes (Government of India, Ministry of Finance, 2002, Chairman: Vijay Kelkar)
and Reports of Tax Administration Reforms Commission (Government of India,
Ministry of Finance, 2014 and 2015, Chairman: Parthasarathi Shome). During the
past 28 years, changes in India’s tax system have been geared to move towards a
system which is simple, relies on moderate rate with a wider base and better
enforcement, serves the objectives of equity, and provides the incentives and
signals, consistent with developing internationally competitive and dynamic
economy.
Table 1 provides the picture of relative growth of direct taxes during the period
1990–1991 to 2018–2019 (Budget Estimates [BE]). The total collection from
direct taxes has become 104.31 times during past 28 years. Within direct taxes,
Table 1. Gross Collections from Direct Taxes (` Crore)
Year
Corporation
Tax
Income
Tax
Total Direct
Taxes
Direct Taxes/
Total Tax Ratio
Direct Tax/
GDP Ratio
1990–19915,335 5,377 11,02419.161.88
1991–19927,853 6,731 15,20722.792.28
1992–19938,898 7,896 18,13224.32.34
1993–199410,060 9,123 20,29826.82.28
1994–199513,822 12,02926,96629.222.58
1995–199616,487 15,59233,56330.182.74
1996–199718,567 18,23438,89129.982.74
1997–199820,016 17,10048,27434.683.07
1998–199924,529 20,24046,60032.412.58
1999–200030,692 25,65457,95933.752.88
2000–200125,177 23,76668,30636.223.15
2001–200225,133 22,10669,19736.992.95
2002–200346,172 36,86683,08538.613.29
2003–200463,562 41,386 105,09041.323.70
2004–200582,680 49,259 132,84743.344.08
2005–2006101,277 60,757 165,25144.344.40
(Table 1 continued)
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