Why the debate on high taxes?
Although total tax revenue as a share of GDP is low, there is a growing feeling among indian citizens, especially the middle class, that they are being overtaxed. There are a variety of reasons behind this sentiment.
1. High tax rates: Many individuals feel that the tax rates imposed on them are too high compared to their income level.
2. Limited incomes: Rising living costs and stagnant salaries are making it difficult for people to make ends meet.
3. Cuts in public spending: Concerns over how effectively the government uses tax revenues also lead people to believe that they are being overtaxed.
However, it is important to analyse the data. While many citizens feel that they are overtaxed, India's total tax revenue as a percentage of GDP is not that high compared to many developed countries.
What is the tax collection efficiency?
Another important aspect of India's tax system is its tax collection efficiency. Direct taxes are generally considered more progressive as they can be adjusted based on an individual's ability to pay. In contrast, indirect taxes such as GST have the same impact on all consumers regardless of their income level.
Statistics show that both direct and indirect taxes in india contribute to about 7% of GDP. While this may seem decent compared to some countries, it is low compared to developed economies where direct taxes play a significant role in total revenue.
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