The correct answer is: a) High informal sector
The informal sector is a part of the economy that is not regulated by the government. It includes activities such as street vending, home-based businesses, and agricultural labor. The informal sector is often characterized by low wages, poor working conditions, and lack of access to social security benefits.
In Andhra Pradesh, the informal sector is estimated to account for over 50% of the economy. This is a significant challenge for tax administration, as it makes it difficult to track and collect taxes from informal businesses. The government of Andhra Pradesh has taken some steps to address this challenge, such as introducing a simplified tax regime for informal businesses. However, more needs to be done to ensure that all businesses, regardless of their size or sector, are paying their fair share of taxes.
The other options are also challenges faced in tax administration in Andhra Pradesh, but they are not as significant as the high informal sector. Complex tax laws can make it difficult for businesses to understand their tax obligations and comply with the law. Limited technological capacity can make it difficult for the government to collect taxes efficiently. Lack of taxpayer awareness can lead to non-compliance. However, these challenges can be addressed through reforms and improvements in tax administration.
The high informal sector is a more difficult challenge to address, as it is rooted in the structure of the economy. The government of Andhra Pradesh needs to take steps to promote the formalization of the economy, such as providing incentives for businesses to register and pay taxes. This will make it easier for the government to track and collect taxes, and it will also help to ensure that all businesses are playing by the same rules.