A Study on Widening of Tax Base and Tackling Black Money

Beyond the issue of unaccounted monies lying overseas, however, is the issue of unaccounted monies lying in India and what is perceived to be the parallel economy. There is, of course, this issue of widening the tax base by taxing exempt income like the agricultural income. Indeed, there is a strong case for taxing agricultural income particularly beyond a large threshold limit. This, however, is an issue which involves political hues and affects centre-state relationship. One easy fix here is to recommend the states to tax such income and ensure that this works as a part of the GST compensation regime. In this study, we have steered clear of overseas monies and taxation of agricultural income. What we have recommended here is that the Government implement simple measures as would ensure widening of the tax base. The appropriate use of IT infrastructure is at the heart of it. Also, we have suggested that to encourage use of cheques and other accountable means payment, there be an incentive both to the payers and payees. This would encourage them not to use cash as a basis of payment. We believe that this would be a better way of achieving compliance than use a stick approach. We do hope that our suggestions will help the Government formulate a policy which will enhance the tax base and remove the undue revenue pressures which currently fall on the shoulders of honest taxpayers.