Why Is Indian Tax Stucture Said To Be Complex Upsc?

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Why is our current tax system so complex?

Why are taxes so complicated? Our tax system could be simple if its only purpose were to raise revenue. But it has other goals, including fairness, efficiency, and enforceability. And Congress has used the tax system to influence social policy as well as to deliver benefits for specific groups and industries.

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What is a complex taxation?

when it features many deductions while Wagner (1976) defines a tax system as complex when its revenue structure is dispersed. The Office of the Taxpayer Advocate within the IRS reports that the US tax code “has grown so long that it has become challenging even to figure out how long it is” (OTA 2010).

What is the structure of taxes in India?

The tax structure in India is divided into direct and indirect taxes. While direct taxes are levied on taxable income earned by individuals and corporate entities, the burden to deposit taxes is on the assessees themselves.

What kind of tax system is found in India UPSC?

Answer: Direct taxes and indirect taxes are the two types of taxes. Both taxes are implemented differently. Some are paid directly, such as income tax, corporate tax, and wealth tax, while others are paid indirectly, such as sales tax, service tax, and value-added tax.

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Which tax form is the most complex?

And starting with tax year 2018, 1040 is the only form you can use unless you qualify for the seniors form, 1040-SR. This is the most complex of the forms for individual tax filers—it was simplified, starting in 2018—but it also gives you the most options for claiming deductions and credits.

What is complexity of the tax system?

Tax professionals relate tax complexity mainly to the ambiguity and excessive changes in tax laws, as well as to the excessive burden of the need to comply. Thus, there seem to be two dimensions of tax complexity: the legislative and the compliance one.

How does a complex tax system distort the economy?

Instead of achieving a long-run redistribution of income, a more progressive tax system distorts economic choices and reduces total real incomes. A change in the progressivity of a state tax structure promotes migration and changes the allocation of resources within the state.

What are the 3 main tax structures?

progressive tax—A tax that takes a larger percentage of income from high-income groups than from low-income groups. proportional tax—A tax that takes the same percentage of income from all income groups. regressive tax—A tax that takes a larger percentage of income from low-income groups than from high-income groups.

What are the problems of Indian tax system?

What are the problems in Indian tax system? A. Direct taxes have a high rate but a low yield in India as in other LDCs. Direct taxes have a high rate but a low proportion to total tax income.

Is the features of Indian tax structure?

The Indian tax structure is framed to make sure that all indices of ability to pay are taxed. Depending on the type of commodity and consumer class excise duties are levied and collected discriminately. The sixth feature is that the tax base is very narrow in India in both direct and indirect tax systems.