Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Measurement of Taxable Capacity and Tax Efforts of Indian States


Affiliations
1 Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India
     

   Subscribe/Renew Journal


It is believed that effective tax system helps in raising revenue and it can be done by expanding the tax base. Indian state's tax system does not have any benchmark which can give an objective to government that how much tax they can exploit according to present tax rate. In this study we have tried to give benchmark to the Indian state governments to realize their taxable capacity to the maximum with the help of regression coefficient of fixed effect test and random effect test for the period of 2004-2005 to 2014-2015. The study take into account different sources of tax revenue of the states as dependent variable and its proxies which affect the capacity factors are considered as independent variables and measured the taxable capacity and tax efforts made by the Indian state governments.

Keywords

Effective Tax System, Revenue, Tax, Tax Efforts, Taxable Capacity.
User
Subscription Login to verify subscription
Notifications
Font Size

  • ACIR, “Measure of state and local fiscal capacity and tax effort,” Report No. M-16, 1962. Retrieved from: http://www.library.unt.edu/gpo/acir/Reports/information/ M-16.pdf.
  • H. Aaron, “Some criticism of tax burden in India,” National Tax Journal, vol. 18, no. 3, pp. 313-318, 1965.
  • R. W. Bahl, “A representative tax system approach to measuring tax effort in developing countries,” International Monetary Funds, vol. 19, no. 1, pp. 87-124, 1972.
  • R. Bird, “A note on tax sacrifice comparison,” National Tax Journal, vol. 17, no. 3, pp. 303-308, 1964.
  • D. N. Dwivedi, “Trends in tax effort of Indian states,” mimeo, unpublished Economic Survey 2017, “Ministry of finance,” 1980. Retrieved from http://indiabudget.nic.in/es2016-17/echapter.pdf
  • H. J. Frank, “Measuring state tax burdens,” National Tax Journal, vol. 12, no. 2, pp. 179-185, 1959.
  • S. Garg, A. Goyal, and R. Pal, “Why tax effort falls short of capacity in Indian states: A stochastic frontier approach,” Indira Gandhi Institute of Development Research, Working Paper No. 2014-032, pp. 1-48, 2014. Retrieved from: http://www. igidr.ac.in/pdf/publication/WP-2014-032.pdf
  • IMF, “Revenue mobilization in developing countries,” International Monetary Fund, 2011.
  • T. M. Le, B. M. Dodson, and J. Rojchaichaninthron, “Expanding taxable capacity and reaching revenue potential: Cross – country analysis,” World Bank, Policy Research Working Paper No. 4559, 2008. Retrieved from: https://www.researchgate .net/profile/Blanca_MorenoDodson/publication/2560
  • S. Mahdavi, “State government tax revenue, tax revenue composition and tax effort index: An Assessment of the 1978-1997 period,” Working Paper, The University of Texas at San Antonio, 2013. Retrieved from: http://business.utsa.edu/wps/eco/0036ECO-090-2013.pdf
  • The Ninth Finance Commission, 1989. Report Retrieved from http://www.nipfp.org.in/media/pdf/books/BK_35/The%20Ninth%20Finance%20Commission%20Issues%20And%20Recommendations.pdf
  • M. A. Oommen, “Relative tax effort of states,” Economic and Political Weekly, vol. 22, no. 11, pp. 466-470, 1987.
  • M. Piancastelli, “Measuring the tax effort of developed and developing countries: Cross country panel data analysis-1985/95,” IPEA, Working Paper No. 818, 2001. Retrieved from: http://dx.doi.org/10.2139/ssrn.283758
  • M. C. Purohit, “Tax efforts and taxable capacity of central and state governments,” Economic and Political Weekly, vol. 41, no. 8, pp. 747-751, 2006.
  • H. Rao, “Taxable capacity tax-efforts and forecasts of tax-yield of Indian states,” Institute for Social and Economic Change, Bangalore, India, 1993. Retrieved from: http://203.200.22.249:8080/jspui/bitstream/2014/9760/1/Taxable_capacityfor_tax_efforts_and_forecast Content.pdf.
  • M. G. Rao, “The Tyranny of the status quo: The challenge of reforming India’s tax system,” India Policy Forum, 2015. Retrieved from http://www.ncaer.org/uploads/photo-gallery/files/1436711357IPF%202015%20Govinda%20Rao%20Conference%20Version%20Draft.pdf
  • S. Raju, “State fiscal capacity and tax effort: Evidence from Indian states,” University of Mumbai, Working Paper No. UDE 39/2/2012, pp. 1-18, 2012. Retrieved from http://archive .mu.ac.in/arts/social_science/eco/pdfs/depart/SR-WP-39-02-2012.pdf
  • T. Sen, “Relative tax effort by Indian states,” National Institute of Public Finance and Policy, Working Paper No. 5, 1997. Retrieved from: http://www.nipfp.org.in/media/ medialibrary/2013/04/wp_1997_05.pdf
  • K. V. S. Sastri, Federal State Financial Relations in India, New-Delhi: Oxford Press, 1966.
  • J. V. M. Sarma, “Panel data models and measurement of states tax effort in India,” Journal of Quantitative Economics, vol. 7, no. 1, pp. 145-164, 1991.
  • G. Timmaiah, Revenue Potential and Revenue Efforts of Southern States, New Delhi: Oxford and IBH Publishing Company, 1979.

Abstract Views: 413

PDF Views: 6




  • Measurement of Taxable Capacity and Tax Efforts of Indian States

Abstract Views: 413  |  PDF Views: 6

Authors

N. K. Bishnoi
Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India
Tanu Juneja
Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India
Satbir Singh
Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India

Abstract


It is believed that effective tax system helps in raising revenue and it can be done by expanding the tax base. Indian state's tax system does not have any benchmark which can give an objective to government that how much tax they can exploit according to present tax rate. In this study we have tried to give benchmark to the Indian state governments to realize their taxable capacity to the maximum with the help of regression coefficient of fixed effect test and random effect test for the period of 2004-2005 to 2014-2015. The study take into account different sources of tax revenue of the states as dependent variable and its proxies which affect the capacity factors are considered as independent variables and measured the taxable capacity and tax efforts made by the Indian state governments.

Keywords


Effective Tax System, Revenue, Tax, Tax Efforts, Taxable Capacity.

References