Moody’s Investors Service in its latest report has said that India’s tax reforms are likely to expand revenue base in fast growing economies like India. However, it recommended that tax reforms must be accompanied by lowering of fiscal deficit and effective management of expenditure. It also said that tax administration and compliance is likely to be most effective in the Philippines, India, Indonesia and Thailand.
According to the report, most sovereigns including India have embarked on tax administration and compliance reforms, especially through the centralisation of multiple agencies and increased usage of technology. It also said that for many sovereigns, measures to broaden the tax base are unlikely to boost fiscal strength unless accompanied by enhanced tax administration and measures that effectively manage expenditure growth. It pointed out that the credit profiles of fast growing economies that are undertaking fiscal consolidation and which have relatively strong or strengthening institutions - such as the Philippines, India and Indonesia - are likely to garner the most support from ongoing tax reforms in the medium term.
On indirect revenue mobilization, the report stated that India and Sri Lanka have both recently streamlined and levied their value-added tax (VAT) or goods and services tax (GST) regimes. For India, it said that this was the result of replacing a system of taxation at multiple points of production with taxation at a sole point. Overall, it noted that indirect revenue mobilisation is likely to be most effective in the Philippines, India and Sri Lanka, as these economies benefit from ongoing reforms.