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Tax System Changes in the Budget

There were high expectations from the budget on the changes in the tax system to provide stimulus to the beleaguered economy. However, fiscal conservatism has prevailed. The attempt to broaden the base by eliminating tax exemptions and preferences could have been done without complicating the tax structure. On the macro side, there are questions about the unrealism of the revenue estimates. Unduly optimistic estimates result in “tax terrorism,” lead to inefficient budget management and have adverse impacts on state finances.

Road Map for Structural Reforms in Budget 2019

There were great expectations of fast-tracking reforms in the budget. However, it disappoints in setting a road map for creating a virtuous cycle of investment and growth. On the fiscal front, the overambitious revenue projections raise questions of credibility and feasibility of containing the deficits at the budgeted level. The wait for banking and financial sector reforms continues. The selective increases in import duties are retrograde, and increase in the taxes on the super-rich complicates the tax system without much gain in revenues. The centralisation through the levy of surcharges does not match the lip service given to cooperative federalism .

Redesigning the Fiscal Transfer System in India

An overwhelming proportion of the poor live in low-income states in India. These states are home to over two-thirds of the children in the 0–14 age group. Therefore, provision of comparable levels of basic social services and physical infrastructure is important to ensure balance and stability in the Indian federation. This underlines the importance of intergovernmental transfers. Conceptually, general purpose transfers are given to enable the states to provide comparable levels of public services at comparable tax effort, and specific purpose transfers are given to ensure a minimum standard of public services. The shortcomings in both the design and implementation of the transfer system in India hinder its ability to achieve the objectives.

Business as Usual

The global situation is tense, marked with protectionism. The domestic environment is constrained by the twin balance sheet crisis. The dull investment climate was further jeopardised by the note ban. The budget has failed to create a policy environment to kick-start a virtuous investment cycle. It has failed to address critical issue of accelerating employment.

Fiscal Federalism

What lessons can economic and political theories and contemporary experiences offer to Nepal in designing a federal system? While political aspects are very important, the focus in this article is on fiscal federalism or efficient organisation of the multilevel system.

Role and Functions of NITI Aayog

The architecture, engineering and management aspects of the new institution, NITI Aayog, will have to be crafted carefully, if it is to serve as an institution to impart dynamism to the developmental process in a harmonious manner. Its effectiveness will depend on how it charts out a course for itself. An important question is whether the Aayog will have influence when it does not have the power to give grants and does not have the powers to make plan allocations to different ministries and departments.

Taxes and Death Are Inevitable, but GAAR Is Avoidable

The report of the committee to review the introduction to the General Anti-Avoidance Rules gives the impression that it fi rst decided on a postponement and then looked for a rationale for the recommended delay. While the report makes a strong case for protecting the interests of foreign investors, it does not clarify how their interests align with those of India. For some reason, the report does not seem to refl ect on the interests of India or even if it does, it assumes that a tax policy which has been drafted in India goes against the interests of India and Indians!

Stimulus, Recovery and Exit Policy: G20 Experience and Indian Strategy

There are large variations among the g20 countries in their deceleration experiences, transmission mechanisms and their current macroeconomic outlook. In an integrated global economy, it is essential that the major economies coordinate their policies. But coordination does not imply simultaneous stimulus withdrawal from all g20 countries. Indeed, a phased withdrawal is probably the best guarantee against the risk of a negative global shock leading to another recession in the event of a simultaneous stimulus withdrawal from all g20 countries. Hence, this paper argues that each country needs to set the timing, scale and composition of its stimulus withdrawal keeping in mind its own macroeconomic outlook.

Debating the Thirteenth Finance Commission

Two comments and two responses on two of the papers published in the special issue of the recommendations of the Thirteenth Finance Commission (27 November 2010). (This discussion could be read alongside that published on 26 March 2011.)

Goods and Services Tax: A Gorilla, Chimpanzee or a Genus Like 'Primates'?

Introduction of goods and services tax in India will be a win-win strategy for both the centre and the states and there is every reason to embrace it. However, reform of this nature involving both the centre and the states is an experiment in cooperative federalism and requires stewardship by statesmen. Resumption of GST reform requires greater recognition of and sensitivity to the views of the states. The IMF-type "one size fi ts all" reform, as has been recommended by the Thirteenth Finance Commission, could simply stall the process. At the same time, while it is legitimate for the states to bargain to retain their fi scal autonomy, they should not use this autonomy to indulge in predatory competition and export the tax burden to non-residents.

The 13th Finance Commission's Report: Conundrum in Conditionalities

Critically appraising the recommendations of the Thirteenth Finance Commission, this paper points out that despite some tinkering with one of the indicators, its approach to tax devolution suffers from the same limitations as those of earlier commissions. More alarmingly, the inability to offset the fiscal disabilities of the states has led it to recommend as many as 12 different types of grants with a host of conditionalities. There are serious questions over the design and implementation of these conditions, in addition to monitoring compliance. Besides, the commission's recommendations on the goods and services tax have been resented by the states and this has actually taken the reform agenda backwards. All this lends weight to the suspicion that yet another opportunity to reform the transfer system has been lost.

Goods and Services Tax: Some Progress towards Clarity

The first discussion paper on Goods and Services Tax released by the Empowered Committee is an important step in signalling the consensus and commitment to harmonise the indirect taxes levied by the states and the centre and in traversing some distance in clarifying the design and implementation aspects of the new tax regime. The efforts of the EC must be complimented for building a consensus on many a contentious issue in the process of evolving the GST in the country. However, much more remains to be done, many of the design and implementation issues are yet to be negotiated and settled and it would take considerable time and effort before they are finalised.

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