India has the most complex income-tax (I-T) legislation in the world. With 9,000 pages of code dedicated to I-T, India beats the largest economy of the world, the US, in sheer volume of legislation, according to a PricewaterhouseCoopersWorld Bank study.
The study, Paying Taxes — The Global Picture, released on November 7, looked at tax regimes of several countries as part of a bigger study on doing business across the world.
One section compared the top 20 economies as measured by their gross domestic product (GDP) to the volume of I-T legislation. India (GDP rank 10) topped the list, followed by the UK (GDP rank 4) with 8,300 pages. Australia (GDP rank 13) was third with 7,750 pages, followed by Japan (GDP rank 2) with 7,200 pages. The US (GDP rank 1) came fifth with 5,100 pages of I-T legislation. Switzerland (GDP rank 17) has the least number of pages, just 300.
The study says that the high volume of legislation leads to thriving business by tax consultants.
The study also states that complicated procedures lead to tax evasion, often due to tax-payer’s ignorance.
“In India, the tax administration and procedures are bigger problem than the number of pages of legisla tion. For instance, the I-T department challenges returns filed as per directives sought from the department itself. This is not done anywhere else in the world,” said R. Jayaprakash, head of research at chartered accountants’ firm Haribhakti and Company.
India also features among the top 20 countries where I-T paid by the corporate sector is only a small part of total taxes paid by them. India ranks 12th on this list, which puts Sierra Leone, Burundi and Gambia in the top three spots.
“Higher indirect taxes lead to higher prices of products and the country becomes less competitive globally. However, India seems to be walking in the opposite direction with the introduction of new indirect taxes like service tax,” says Sidhhartha Sen, research director, Institute of Cost and Work’s Accountants of India.