India to reform tax system

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FT.com / Asia-Pacific - India plans to overhaul tax system.

India’s government has unveiled plans for a substantial reform of its archaic tax code, which it hopes will curb widespread tax evasion.

The reforms proposed by Pranab Mukherjee, the finance minister, .... plans to lower the tax rate for local companies from around 30 per cent to 25 per cent.

The government hopes that by lowering the tax burden and simplifying tax rules, more of its citizens will pay up in full, raising the government’s revenue base in the long-run.

This is to be welcomed.

But let no one say that this is Laffer inspired: it is not. Laffer said cutting rates on the same base increased revenue. This is cutting rates and broadening the base. Not the same thing at all.

I like as braod a base as possible over a wide range of taxes all at low rates.

People like the Taxpayer's Alliance call that double taxation. I call it efficient tax management, becasue it is.

This is good news in India.

It's a move other countries might follow.