Tax Reforms in India Since 1991

The issues of taxation

In response to the need, the Tax Reform Act of 1986 was enabled. The reform was intended to be revenue neutral, but broaden the tax base previously held. Congress had depressed marginal rates, and concurrently got rid of tax shelters, tax preferences, and other opportunities for tax avoidance. It now seems what worked as great solution in the past is not working now, “The Tax Reform Act of 1986 has not proved a stable outcome: Congress has since narrowed the tax base and raised income tax rates. Internationalization of the economy raises the question of whether corporate income taxes can be relied upon as a stable source of revenues. Moreover, the tax system is also under continual reexamination because federal deficits of $300–$400 billion a year are now commonplace…” (Greatz, 2007, p.

The budget will also be adversely affected. The net loss in the budget would be about 2.5% of the country’s GDP representation $4.5 trillion. There are the figures that could have developed with the implementation of the tax policy in the country. The adverse effects of the tax policy has forced the federal government of the United States of America to shift to the alternative minimum taxation as it is stipulated in the Tax Relief Reconciliation Act of 2001 law. This was more lenient as it had much negative effects on the operation of the country. Even though the revenues and the budgets are affected, the effect of the alternative taxation was no such much adverse. The alternative taxation served the real need in the society.

Foremost, most nation’s taxing systems characteristically have five main features that either make them greatly competitive or not. Competitiveness includes desirability for both the society and business activity. A nations corporate rate, its consumption tax, property tax, the individual tax, and its international (global or territorial) are what make up the core features of competiveness. But is the competiveness of a nation’s taxing system related for both industrialized and developing nations? The answer is yes, but not completely.

Recently there has been a significant tax reform, which is tax cuts, claimed by American president Donald Trump, affects both individuals and families. The U.S. Senate has passed the tax reform bill 51 to 49, which is the first amendment to the tax law by the U.S. Congress in approximately 30 years. It is the first major victory Trump has been in power for nearly a year. The heart of the new tax reform aims to reduce the federal income tax rate for individuals and businesses. Firstly, this short paper illustrates the most critical aspects of the new tax reforms (lower rates for individuals, middle class tax cuts, and itemized deductions). Then, the paper explores the most significant changes or influences and the biggest

The Tax system of the United States is in absolute disorder. Politicians on both sides, of the political spectrum, agree that the tax system that we use today is complicated and expensive. In order to completely understand the immense tax problems that are in this country, the current tax problems must be first analyzed and explained, short terms solutions must be created and used as a temporary answer for these problems, and finally long term solutions must be the permanent fix for the myriad of the problems that are troubling this nation.

The federal income tax system is an intricate system and increases its complexity through newly enacted laws and regulations. The tax codes are difficult to decipher; however, it is a system that maintains the development of an entire country. The political aspects serve to focus on major loopholes and develop strategies for improvements. The laws and regulations highly coincide and work cohesively to obtain its objectives. Undoing or restructuring the federal tax system would cause a major disruption on economic and social terms (Prescott, & Hardin, 2013).

Taxes are a necessary component for operating a government, however, they are also the source of great debate within our society. Especially when considering what types of taxes to use, and how much to tax the population without negatively impacting the economy. Income taxes are currently one of the biggest sources of income for the government, but are also one of the biggest concerns given the level of complication involved with the current tax system. Although many argue that the current progressive tax system contributes to our country’s economic growth, research indicates there may be benefits for simplifying the income tax system without stalling growth. One theory indicates implementing a flat tax system would not only provide consistency for businesses and consumers, it would positively impact economic growth. If given the appropriate considerations, including an equitable rate, a flat tax would increase consumer confidence and lead to an increase in consumption, and ultimately growing real gross domestic product (GDP).

Politics is the process in which negotiation and resistance is utilized to establish a stable society. In contrast, the current United States tax system fails to form such solid grounds. Without such a complex system, anarchy and chaos will overrule the goal of fairness that is favorable to people. Taxation is a branch of politics that is distorted in some ways in which it does not satisfy many people’s needs. Although a government is designed to run an organized society and meet the needs of citizens, it does not always do a great job. Many people feel that their place in the financial world grants them immunity from excessive taxes while others feel they are being hurt by such an unequal tax burden. The purpose of taxes is to benefit society as a whole and keep the government running, but it is not working properly and efficiently. People’s various situations make it difficult to implement the current tax system. Taxation has long been deliberated, and the issue holds many points, such as income, a person’s age, and where they live, these circumstances are unequal and unfair to many people.

Income tax is considered to be one of the greatest ways that a country amasses wealth through known means from the public in order to use the funds for the benefit and welfare of the community. Since a very long time, there have been many discussions and debates on the way the finds collected for income tax have been spend. There are many who think that there is a lot of mismanagement and feel that the amount of the actual money spent on welfare of the community is far less that what gets collected by the country.

In the article Tax reform =Growth, the author Rory Meakin (2012) suggests that Australia has a good tax system but it still has its problems. He compares the tax system between Britain and Australia as well, and discusses the importance for the government to change its approach of raising taxes to make it cheaper, fairer and more legitimate in Australia. The article outlines the complexities of the taxation system in the country, which resulted to the lost of its legitimacy since many people do not understand how much they should pay. It advises the need for the government to make the tax system to be as neutral as possible by eliminating complications that will add confusion to its approach. The journal name tax reform equals to growth and he totally agrees that raising the tax and keeping the tax neutral is the better way to face the tax problems nowadays.

This paper examines the generally accepted desirable characteristic of a system of taxation. I describe in this paper that even where every one agrees that the tax system should be simple as dictated by the first maxim of Adam Smith, no country is yet to meet this standard. Questions on policy, complexity, equity, administrative efficiency, cost of compliance all increasing the cry for a tax change. Many Eastern Europeans have adopted the flax tax system and presently has an increase economic growth. However, are they fully operating the flax tax system?

In addition to economic issues, taxation is also a political issue. Political leaders formulate tax policies to bring reforms in the taxation system in order to promote their agendas. The major tax reforms include: increasing or decreasing the tax rate, imposing new taxes on certain products and changing the definition of taxable income. It is evident from the research studies that no one deliberately wants to pay taxes. U.S’ tax policy reflects expression of influence - i.e., those who have power are successful in paying low taxes and their burden is shifted to people who have no power. Therefore retired individuals, small business owners and farmers find ways efforts to reduce their tax burden. Since its existence, tax policy has been enormously used for promoting political and economic agendas.

Taxation systems are usually modeled in such a way that they take into consideration the social welfare of the citizens. The government and other policy makers have the responsibility of ensuring that the system takes into account the needs of the citizens. The bottom line is that taxation should foster equal distribution of resources. The rate of taxation is usually arrived at after several considerations have been made. The rates are not fixed as they depend on the various economic changes. The issue of how taxation should be distributed among the different economic classes is yet to be addressed.

Stability: The government needs a stable and dependable source of tax revenue so they can manage the country’s economy. The aim of tax reform is to make sure the federal government can achieve its economic objectives. Malaysian tax law system is stable and remained unchanged for so many years. These unchanged tax law will attract foreign investors to invest in Malaysian company thus improve the economic growth.