CGD in the News

Devesh Kapur and Arvind Subramanian: A property tax proposal (Business Standard)

February 12, 2014

From the article: 

In our last piece, we had argued that taxation is the economic glue that binds citizens to the state in a necessary two-way relationship. A citizen's stake in exercising diminishes if he does not pay in a visible and direct way - typically via direct taxes or user fees - for the services the state provides. We estimated that a very small percentage of Indians (about 10 per cent) are in this taxpayer accountability relationship with the state. Unless India brings more people into the net through some form of direct taxation, the promise of Indian democracy will remain unfulfilled. How should this be accomplished?

Four key factors bear upon this question. India is decentralising. It is rapidly urbanising. Wealth is increasingly vested and locked up in land and property. And politicians will be extremely reluctant to impose direct taxes, especially if they are close to those being taxed. Consider each in turn.

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