NEW DELHI: The 15th chairman of the finance committee, NK Singh, said on Friday that India’s tax revenue potential is 4% lower of GDP and the country needs to make far-reaching reforms in the tax management system. recipes.
He also said that an incentive mechanism for states must be developed so that their policies are aligned with those of the central government.
Speaking at the CSEP-IMF event on âSecuring Sustainable Finance and Medium-Term Fiscal Frameworks: International Experience and Relevance for India,â Singh said there was a need to redo direct taxes and indirect and fundamentally reform the revenue system.
“At least 4% of GDP represents a lost potential in terms of India’s revenue and if any part of this could be achieved, it would go a long way to help align not only the inevitable spending needs, the needs in the event of pandemic and health needs, but also find convergence between development and medium-term fiscal policy statementâ¦ âSingh said.
Speaking at the event, former RBI Deputy Governor Rakesh Mohan said: âAccording to the finance committee’s calculations, we are about 4 percent of GDP (gross domestic product) below of our fiscal potential. This is a lot which represents about 25 percent of the total. Central and State taxes collected. “
The finance committee’s 15th report, tabled in parliament in February, pointed out that the Centre’s actual tax revenue over the past ten years was on average 4 percent lower than budgeted.
âThe difference between the revised estimates and the actual figures is by no means negligible. This forecasting error leads to ad hoc expenditure management, usually in the second half of the year, which includes reductions in development expenditure creating uncertainties for executing agencies, reneging on contractual obligations and payments, and significant deferral of liabilities. The problem is also present in states, although it is more acute for some, âthe report said.