ANVESHAK-International Journal of Management

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Direct Tax and Laffer Curve


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1 Jagannath International Management School, Vasant Kunj, New Delhi – 110019, Delhi, India
     

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Direct tax structure in India is fluctuating from last many years. There was a time when the Indian Government was charging the maximum tax rate of 97.75% in the year 1973-74. Since then it is decreasing. But still the individual and corporate tax rate imposed by the government of India does not seem to generate the maximum tax revenue. Indian government is under debt from many years. This debt is increasing day by day. 2018, is the year in which interest on debt is almost equal to the amount of debt. The government needs more tax revenue to overcome its expenditure and pay off the debt to foreign countries. On the other hand, if the tax revenue is less and expenditure is more than the government has to borrow more funds from foreign countries leading to more debt. Immediate action is required on such an issue. Hence, the tax structure needs to be revised. In this paper we are going to determine the optimum tax rate for both individual as well as corporate tax. With the help of this optimum tax rate the government is going to generate maximum tax revenue and able to meet its expenditure along with the payment of its debt. Laffer curve concept is used in our study to find out the optimum tax rate which will generate maximum revenue and contributing to the economic growth. The period for which the data has been collected range from 1996 to 2016. The data is analysed with the help of Ms Excel and EViews 8.

Keywords

Corporate Tax Rate, Corporate Tax Revenue, Individual Tax Rate, Individual Tax Revenue, Laffer Curve.
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  • Direct Tax and Laffer Curve

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Authors

Himani Gupta
Jagannath International Management School, Vasant Kunj, New Delhi – 110019, Delhi, India
Manisha Gupta
Jagannath International Management School, Vasant Kunj, New Delhi – 110019, Delhi, India

Abstract


Direct tax structure in India is fluctuating from last many years. There was a time when the Indian Government was charging the maximum tax rate of 97.75% in the year 1973-74. Since then it is decreasing. But still the individual and corporate tax rate imposed by the government of India does not seem to generate the maximum tax revenue. Indian government is under debt from many years. This debt is increasing day by day. 2018, is the year in which interest on debt is almost equal to the amount of debt. The government needs more tax revenue to overcome its expenditure and pay off the debt to foreign countries. On the other hand, if the tax revenue is less and expenditure is more than the government has to borrow more funds from foreign countries leading to more debt. Immediate action is required on such an issue. Hence, the tax structure needs to be revised. In this paper we are going to determine the optimum tax rate for both individual as well as corporate tax. With the help of this optimum tax rate the government is going to generate maximum tax revenue and able to meet its expenditure along with the payment of its debt. Laffer curve concept is used in our study to find out the optimum tax rate which will generate maximum revenue and contributing to the economic growth. The period for which the data has been collected range from 1996 to 2016. The data is analysed with the help of Ms Excel and EViews 8.

Keywords


Corporate Tax Rate, Corporate Tax Revenue, Individual Tax Rate, Individual Tax Revenue, Laffer Curve.

References





DOI: https://doi.org/10.15410/aijm%2F2019%2Fv8i2%2F145177