Tax Effort of the Indian States from 2001–2002 to 2016–2017: A Stochastic Frontier Approach

2021 ◽  
pp. 097639962110270
Author(s):  
Ganesh Kawadia ◽  
Ankit Kumar Suryawanshi
Keyword(s):  
Data Model ◽  
Labour Force ◽  
Stochastic Frontier ◽  
Bank Credit ◽  
Tax Revenue ◽  
Stochastic Frontier Approach ◽  
Indian States ◽  
Goods And Services ◽  
Tax Effort ◽  
Tax Capacity

This article estimates the tax capacity and tax effort of 17 major states of India from 2001–2002 to 2016–2017 using the stochastic frontier panel data model. It is found that per capita income, agriculture activity, infrastructure, labour force and bank credit are the significant determinants of tax capacity, while social sector spending and central transfer to states are significant in determining tax effort. The Goods and Services Tax has reduced the states’ tax powers. Therefore, the states are highly dependent on their limited legislative taxes for revenue mobilization. However, there is little scope for the subnational governments to increase tax revenue as all states have achieved at least 90% of their tax potential.

Why Tax Effort Falls Short of Tax Capacity in Indian States

2016 ◽  
Vol 45 (2) ◽  
pp. 232-259 ◽  
Author(s):  
Sandhya Garg ◽  
Ashima Goyal ◽  
Rupayan Pal
Keyword(s):  
Stochastic Frontier Analysis ◽  
Political Competition ◽  
Stochastic Frontier ◽  
Positive Association ◽  
Negative Association ◽  
Intergovernmental Transfers ◽  
Indian States ◽  
Frontier Analysis ◽  
Tax Effort ◽  
Tax Capacity

This article attempts to measure tax capacity and tax effort of fourteen major Indian states from 1991–1992 to 2010–2011 using stochastic frontier analysis. It shows that the variation across states in tax effort is wide and increasing over time. While per capita gross state domestic product, literacy rate, and labor force participation have positive association with tax capacity, a greater share of agriculture has negative association. Furthermore, intergovernmental transfers, given tax capacity, have negative association with tax effort of states. Expenditure on debt repayment is also adversely associated with tax effort but to a lower extent than outstanding liabilities. Enactment of Fiscal Responsibility and Budget Management Act is associated with improvement in states’ tax effort. Both within-state political competition and governance indicators have positive association on tax effort.

Whether States Have Capacity to Sustain Projected Growth in GST Collection During the GST Compensation Period?

2019 ◽  
Vol 11 (1-2) ◽  
pp. 30-53
Author(s):  
Sacchidananda Mukherjee
Keyword(s):  
Tax Compliance ◽  
Jel Classification ◽  
Tax Revenue ◽  
General Category ◽  
Goods And Services ◽  
Tax Effort ◽  
Design Structure ◽  
The Impact ◽  
Union Government ◽  
Tax Capacity

Achieving harmonisation in design, structure and administration of taxes on goods and services was the major driving force behind the introduction of goods and services tax (GST) in India. Goods and services tax subsumes many taxes from both union and state tax bases. Achieving tax harmonisation in a federal system curtails fiscal autonomy of both the union and sub-national governments and therefore faces steep resistance. Revenue uncertainty associated with any tax reform is a major cause for concern for all governments and therefore the assurance of revenue protection given by the union government to states helped to achieve broad consensus in favour of GST. On average, state taxes subsumed under the GST used to contribute two-third of own tax revenue and finance one-third of total expenditure for general category states. Unlike the union government, states have limited taxation power (tax handles) to generate additional revenue to cope up with any major revenue shortfall on account of GST collection. Therefore, the revenue protection enshrined under the GST Compensation Act has played an important role behind introduction of GST in India. This has also helped the GST Council to experiment with design, structure and administration of GST during the GST compensation period (first 5 years of GST implementation) to moderate the impact of GST on Indian economy as well as facilitate ease of tax compliance. Given the ongoing shortfall in GST collection, many scholars believe that liberal GST revenue protection granted under the GST Compensation Act to states is unjustifiable. The GST compensation period will be over by June 2022, and thereafter GST collection of individual states is expected to depend on their tax capacity as well as tax effort. It is worthy to investigate whether states have tax capacity to sustain 14 per cent growth rate in tax collection, as projected in the GST Compensation Act. The objective of this article is to estimate tax capacity of the states with reference to major tax revenue subsumed under GST and see whether states could sustain 14 per cent growth in their GST collection during the GST compensation period if they put adequate tax effort. JEL Classification: H21, H68, H71, H77

AGGLOMERATION TAXES IN THE INDIAN STATES DUE TO WIDER ECONOMIC BENEFITS: AN EMPIRICAL ASSESSMENT

2021 ◽  
pp. 1-30
Author(s):  
SALONI BHUTANI ◽  
ALOK KUMAR MISHRA
Keyword(s):  
Urban Areas ◽  
Motor Vehicle ◽  
Economic Benefits ◽  
Tax Revenue ◽  
State Governments ◽  
Cross Sectional ◽  
Indian States ◽  
Goods And Services ◽  
Indian State ◽  
Tax Bases

This paper carries out an empirical study to examine the contribution of urban areas in generating tax revenue and growth at 28 Indian state levels. The study is based on the hypothesis that the productivity and agglomeration externality effects present in cities, known as “wider economic benefits”, lead to enhanced tax bases of State Governments. The cross-sectional estimation has confirmed that urbanization and state gross domestic product per capita significantly contribute to the tax bases of State Governments, such as sales tax, stamps, registration duty and motor vehicle tax. These three agglomeration taxes (including goods and services tax) are recommended for sharing with urban local bodies.

scholarly journals Analisis Hubungan antara Infrastruktur Jalan dan Tax Capacity: Studi Kasus Indonesia

2018 ◽  
pp. 33-50
Author(s):  
Dian Andriany ◽  
Riatu Mariatul Qibthiyyah
Keyword(s):  
Positive Relationship ◽  
Stochastic Frontier Analysis ◽  
Agricultural Sector ◽  
Stochastic Frontier ◽  
Tax Revenue ◽  
Tax Administration ◽  
Analysis Method ◽  
Frontier Analysis ◽  
The Relationship ◽  
Tax Capacity

The study explore the relationship between road and spending infrastructure with tax capacity in Indonesia. Using stochastic frontier analysis method and tax revenue data of 34 provinces in 2011–2016, this study confirms positive relationship between infrastructure spending and central and local tax capacity, while the availability of road infrastructure has positive significant impact only on local tax capacity. The level of income and education indicates a positive significantly effect both on central and local tax capacity. However, the greater the dominance of the agricultural sector in the economy tends to reduce central tax capacity. Similarly, tax administration factors aect central tax capacity positively. ========================== Penelitian ini berusaha mengeksplorasi hubungan antara infrastruktur jalan dan belanja infrastruktur dengan tax capacity di Indonesia. Dengan menggunakan metode stokastik frontier dan data penerimaan pajak mencakup 34 provinsi pada 2011–2016, hasil penelitian menunjukkan hubungan positif antara belanja infrastruktur dengan tax capacity pajak pusat maupun daerah, sedangkan ketersediaan infrastruktur hanya berpengaruh positif dan signifikan pada tax capacity pajak daerah. Tingkat pendapatan dan pendidikan masyarakat secara signifikan menunjukkan pengaruh positif, baik terhadap tax capacity pajak pusat maupun daerah. Akan tetapi, semakin besar dominasi sektor pertanian dalam perekonomian cenderung mengurangi tax capacity pajak pusat di provinsi tersebut. Demikian halnya faktor administrasi perpajakan berpengaruh positif terhadap tax capacity pajak pusat.

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