Title: The interaction of rate schedule and tax revenue: an evaluation of the Laffer effect

Authors: Arun Sharma; Jaspal Singh

Addresses: University Business School, Guru Nanak Dev University, Amritsar, Punjab, India ' University School of Financial Studies, Guru Nanak Dev University, Amritsar, India

Abstract: Taxes have been an indispensable entity for governmental revenue. While indirect taxes help finance the resources quickly, greater reliance over them tends to be distortionary both on economic and political front. Hence, there has been an increased desire to generate the required revenue resources through direct taxes especially through personal income taxes. However, the question of enforcing compliance for personal tax law has been an Achilles heel for the governance structures around the world. The principal focus of tax reforms henceforth has been on the moderation of personal income tax rates in the anticipated belief that it is high tax rates that inhibit effective compliance. The present study is an attempt to examine the said relationship between tax rate and income tax revenue in the Indian context. The statistical results upheld the applicability of the Laffer effect in the Indian context. The findings provide suggestive responsive measures for the policy makers and practitioners.

Keywords: Laffer curve; income tax; tax responsiveness; public finance.

DOI: 10.1504/IJBG.2023.134384

International Journal of Business and Globalisation, 2023 Vol.35 No.1/2, pp.20 - 31

Received: 26 Aug 2019
Accepted: 15 Jan 2020
Published online: 20 Oct 2023 *

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