Odisha Tax and Economic Reforms

by

Odisha  Tax and Economic Reforms

The economic Liberalization-2/”>Liberalization in India , initiated in 1991, with principles of Liberalization , Privatization and Globalization/”>Globalization-3/”>Globalization (LPG) of the country’s economic policies, with the goal of making the economy more market and service-oriented and expanding the role of private and foreign Investment. Specific changes include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment. Liberalization has been credited by its proponents for the high economic Growth recorded by the country in the 1990s and 2000s. And it has positive impact on the state of Odisha as can be visibly seen from various sectors.

India’s GDP has increased thereafter and also  the GSDP of state has increased many folds.  The Gross State Domestic Product of Odisha for 2017-18 at current prices is estimated to be Rs 4,12,481 crore. This is 8.8% higher than the revised estimate for 2016-17.

Economic reforms has vast impact on the economy of the country and it is also true for the states. Even the poor states like Odisha has great impact that can be seen visibly. As Odisha is on the path of development. One can see the development in every sector of the state .Being the agriculture, Industry ,. Infrastructure-2/”>INFRASTRUCTURE , Health , Education etc.

Development in Agriculture: Direct Benefit Transfer (DBT) of seed input subsidy , the only of its kind in the country, is implemented in the State from Kharif 2016 to bring greater transparency and efficiency in the manual process. About 3.49 lakh beneficiaries are benefited and an amount of Rs 28.36 crore seed subsidy has been disbursed during Kharif 2016.

With the signing of MoU with World Fish International Organisation, Odisha started new initiatives in fishery sector on capacity building for fishery Officers, carp Mola polyculture and reserviour fishery development in the State.

Food Supplies and Consumer Welfare Department has planned to automate 14000 + fare price shops (FPS) in the state by March, 2017as the last mile connectivity of end to end computerization aimed at transforming TDPS operations.

Development in Industry: Go-iPLUS, a GIS based industrial land use and infrastructure information system is launched to help the investors to select an area of land. The system provides detail information about the key attributes of existing industries operational in a particular cluster such as sector soft operation, products, capacity, EMPLOYMENT and raw-material etc.

“Invest Odisha” is the newly launched mobile App developed by the Department to provide all information for a new investor for doing business in Odisha.

Infrastructure: Works Department, Odisha successfully set up Asset Management System with G.P. with application of e-nirman Software and Soil stabilization technique to monitor all the improvement and repair of road work scientifically. The pilot project on use of fly-ash pre-fab structures shall ensure reduced cost of construction of buildings.

Tax Revenue

Sales tax is the largest component of the tax revenue of the state. Sales tax, levied on the sale of goods in the state is expected to generate Rs 15,840 crore in 2017-18. This is an increase of 16.3% from 2016-17.

Rs 3,600 crore is expected to be generated through state excise duties. This is an increase of 20% over the estimates of 2016-17. In addition, revenue will be generated through taxes on goods and passengers, levy of duty on electricity, stamp duties, taxes on vehicles, etc.

Upon the implementation of the Goods and Service Tax, the sales tax, along with other state taxes will be subsumed into State Goods and Services Tax (SGST).

Goods and Service Tax

Government of India passed the act for the indirect taxex as many indirect taxes has been subsumed in the GST.The State Assembly unanimously passed a resolution ratifying the Constitution 122nd Amendment Bill, 2014 on GST on 1st September 2016. The State has actively participated in all GST Council meetings in order to present the views of the State in an effective manner on all issues concerning proposed laws, rules, processes and systems for GST. The State has to establish the legal framework through enactment of the GST laws by the Centre & the States, put in place a robust Information Technology based platform for administering the new tax, manage the change through training of the tax administrators & officials, familiarize the members of trade & industry with the processes of the new Taxation system and sensitize the public about its effect. These are the challenges before the State to roll out GST next year.Odisha Tax and Economic Reforms

The model GST law has been drafted and discussed in GST Council. The GST Council has also decided the bands of tax rates for GST. It has constituted a Committee to study individual goods and feed them into the category of tax rates. Cross Empowerment is being provided in the Acts so as to avoid dual authority over tax payers. The State authorities will be empowered to administer the CGST and IGST Act and so also the Central Authorities would be empowered to administer SGST Act. The calculation of revenue base of States and the formula for compensation on account of loss have been decided. The threshold limit for registration and the compounding limits have also been agreed upon. Consensus on these issues will pave the way for introduction of GST between July to September, 2017.

A number of benefits are expected to accrue not only to the Central & State Government but also to the consumers, business & industry in the ensuing GST regime. Under the GST model, all the Central and State Government taxes will be merged into a single tax, which will reduce cascading or the double taxation effect.

Non-Tax Revenue

Odisha has estimated to generate Rs 9,500 crore through non-tax sources in 2017-18. This is a 7.7% growth from revised estimates of 2016-17.

The government is estimated to generate Rs 6,630 crore from non-ferrous mining and metallurgical industries. which is an increase of 7.4% over 2016-17 (RE). Further, the government has estimated to generate Rs 489 crore through major Irrigation, Rs 229 crore from minor irrigation, and Rs 119 crore through coal and ignite in 2017-18.

Deficits , Debts Fiscal Targets

The Fiscal Responsibility and Budget Management (FRBM) Act, 2005 of the state provides annual targets to progressively reduce the outstanding liabilities, Revenue Deficit and Fiscal Deficit of the state government.

Revenue deficit: It is the excess of Revenue Expenditure over Revenue Receipts. A revenue deficit implies that the government needs to borrow in order to finance its expenses, which do not create capital assets. However, the budget estimates a revenue surplus of Rs 6,694 crore (or 1.62% of state GDP) in 2017-18. This implies that revenue receipts are expected to be higher than the revenue expenditure, resulting in a surplus. The estimate indicates that the state is within the target of eliminating revenue deficit, prescribed by the 14th Finance Commission.

Fiscal deficit: It is the excess of total expenditure over total receipts. This gap is filled by borrowings by the government, and leads to an increase in total liabilities of the government. In 2017-18, fiscal deficit is estimated to be Rs 14,435 crore, which is 3.5% of the state GDP. The estimate reaches the 3.5% limit prescribed by the 14th Finance Commission.

Debt Stock: It is the accumulation of borrowings over the years. As of 2017-18, the debt stock is expected to be 18.6% of the state GDP (Rs 76,744 crore), which is an increase from 16.4% in 2016-17. The debt stock is estimated to be 19.7% of state GDP in 2017-18 and further increase to 20.7% in 2019-20. Increase in debt stock over time indicates increasing interest payment and principal repayment burden in the future. In addition to these liabilities, the state has provided guarantees to loans of other entities worth Rs 2,256 crore.,

Impact of Tax Reforms in Odisha

The tax reforms that have been implemented in Odisha have had a number of positive impacts on the state’s economy. These impacts include the following:

  • Increased investment. The tax reforms have made Odisha a more attractive destination for investment. This has led to an increase in the number of businesses that are operating in the state, as well as an increase in the number of jobs that are being created.
  • Increased economic growth. The tax reforms have contributed to the state’s economic growth. This has been reflected in the state’s GDP growth rate, which has been increasing in recent years.
  • Increased tax revenue. The tax reforms have led to an increase in the state’s tax revenue. This has enabled the government to invest in a number of important infrastructure projects, such as roads, bridges, and schools.
  • Improved efficiency of the tax administration. The tax reforms have improved the efficiency of the tax administration. This has made it easier for businesses and individuals to comply with the Tax Laws, and it has also made it easier for the government to collect taxes.

Challenges and Opportunities for Tax Reforms in Odisha

The tax reforms that have been implemented in Odisha have faced a number of challenges. These challenges include the following:

  • Lack of awareness of the tax reforms. Many businesses and individuals are not aware of the tax reforms that have been implemented. This has made it difficult for them to comply with the new laws.
  • Lack of Resources. The government of Odisha does not have the resources to fully implement the tax reforms. This has made it difficult to improve the efficiency of the tax administration and to collect taxes effectively.
  • Political opposition. The tax reforms have faced political opposition from some groups. This has made it difficult to implement the reforms and to ensure that they are effective.

Despite these challenges, there are a number of opportunities for tax reforms in Odisha. These opportunities include the following:

  • The state’s economy is growing. The state’s economy is growing at a rapid pace. This provides an opportunity to increase tax revenue and to invest in important infrastructure projects.
  • The state has a young Population. The state has a young population that is eager to work and to contribute to the economy. This provides an opportunity to create jobs and to increase tax revenue.
  • The state has a number of Natural Resources. The state has a number of natural resources, such as Minerals, forests, and water. These resources can be used to generate tax revenue and to create jobs.

The government of Odisha should continue to implement tax reforms in order to improve the state’s economy. The reforms should be designed to simplify the tax system, reduce the tax burden on businesses and individuals, and improve the efficiency of the tax administration. The government should also work to increase awareness of the tax reforms and to improve the resources that are available to implement the reforms.

What is tax reform?

Tax reform is the process of changing the way a government collects taxes. It can involve changes to the tax rates, the Types of Taxes that are levied, or the way that taxes are collected.

What are the goals of tax reform?

The goals of tax reform can vary depending on the country or jurisdiction. Some common goals include:

  • Increasing government revenue
  • Reducing the tax burden on businesses and individuals
  • Making the tax system more efficient and fair
  • Reducing tax avoidance and evasion

What are the different types of tax reform?

There are many different types of tax reform, but some common approaches include:

  • Base-broadening: This involves increasing the tax base, which is the total amount of income or wealth that is subject to taxation. This can be done by reducing the number of exemptions and deductions, or by increasing the rates of taxation.
  • Rate reduction: This involves lowering the rates of taxation. This can be done across the board, or it can be targeted at specific types of income or taxpayers.
  • SIMPLIFICATION: This involves making the tax system simpler and easier to understand. This can be done by reducing the number of tax brackets, or by eliminating complex tax rules.

What are the benefits of tax reform?

The benefits of tax reform can vary depending on the specific reforms that are implemented. However, some potential benefits include:

  • Increased government revenue: Tax reform can increase government revenue by broadening the tax base or by increasing the rates of taxation.
  • Reduced tax burden: Tax reform can reduce the tax burden on businesses and individuals by lowering the rates of taxation or by eliminating exemptions and deductions.
  • More efficient and fair tax system: Tax reform can make the tax system more efficient and fair by simplifying the tax code and by eliminating loopholes that benefit certain taxpayers.
  • Reduced tax avoidance and evasion: Tax reform can reduce tax avoidance and evasion by making the tax system more transparent and by increasing the penalties for non-compliance.

What are the risks of tax reform?

The risks of tax reform can also vary depending on the specific reforms that are implemented. However, some potential risks include:

  • Decreased government revenue: Tax reform can decrease government revenue if it is not implemented carefully. This can lead to budget deficits and higher levels of debt.
  • Increased compliance costs: Tax reform can increase compliance costs for businesses and individuals if it is not implemented carefully. This can lead to higher costs for businesses and individuals, and it can also lead to a decrease in compliance rates.
  • Unintended consequences: Tax reform can have unintended consequences that can harm the economy or the tax system. For example, tax reform that is designed to increase government revenue may actually decrease government revenue if it leads to a decrease in economic activity.

What are the challenges of tax reform?

Tax reform is a complex and challenging process. There are many different factors to consider, and it is important to carefully weigh the potential benefits and risks of any proposed reforms. Some of the challenges of tax reform include:

  • Political opposition: Tax reform is often opposed by special interest groups that benefit from the current tax system. This can make it difficult to pass tax reform legislation.
  • Technical complexity: The tax code is complex, and it can be difficult to design tax reforms that are both effective and efficient.
  • Economic uncertainty: Tax reform can have a significant impact on the economy. It is important to carefully consider the potential economic effects of any proposed reforms.

What are the lessons learned from past tax reforms?

There are many lessons that can be learned from past tax reforms. Some of the key lessons include:

  • It is important to carefully consider the potential benefits and risks of any proposed reforms.
  • Tax reform is often opposed by special interest groups.
  • The tax code is complex, and it can be difficult to design tax reforms that are both effective and efficient.
  • Tax reform can have a significant impact on the economy.
  • It is important to carefully consider the potential economic effects of any proposed reforms.

Question 1

Which of the following is not a type of tax?

(A) Income tax
(B) Sales tax
(C) Property tax
(D) Wealth tax

Answer

(D) Wealth tax is not a type of tax. It is a type of asset tax.

Question 2

Which of the following is not a goal of economic reforms?

(A) To increase economic growth
(B) To reduce POVERTY
(C) To improve the standard of living
(D) To increase government revenue

Answer

(D) Increasing government revenue is not a goal of economic reforms. It is a goal of Fiscal Policy.

Question 3

Which of the following is not a type of economic reform?

(A) Trade liberalization
(B) Privatization
(C) Deregulation
(D) Inflation-targeting/”>Inflation targeting

Answer

(D) Inflation targeting is not a type of economic reform. It is a Monetary Policy tool.

Question 4

Which of the following is not a benefit of economic reforms?

(A) Increased economic growth
(B) Reduced poverty
(C) Improved standard of living
(D) Increased government revenue

Answer

(D) Increased government revenue is not a benefit of economic reforms. It is a goal of fiscal policy.

Question 5

Which of the following is not a cost of economic reforms?

(A) Job losses
(B) Increased inequality
(C) Social unrest
(D) Inflation

Answer

(D) Inflation is not a cost of economic reforms. It is a monetary policy tool.