Bengaluru: Wipro chairman Azim Premji on Tuesday suggested that low tax rates encourage voluntary compliance by taxpayers and helps expand the tax base.
"Tax collection is best achieved by voluntary compliance. One of the prime drivers for voluntary compliance would be lower tax rates. Lower the rate, lower is the incentive to evade taxes as the cost of evasion would not be commensurate with the cost of compliance," he said.
Premji was delivering the keynote address at a function in Bengaluru to mark 158th Income Tax Day.
Under the topic increasing the tax base, he said it was heartening that the union government has focused on widening the tax base.
Tax to GDP ratio in India is about 16 percent, including state taxes, whereas in many developed countries it is around 35-40 percent, said Premji.
Insisting that India's tax-GDP ratio also climbs substantially, he opined that the country's public social investments, which include areas like education, health and social security, will also rise.
He, however, suggested that there was a need for expanding the tax base instead of keeping higher rates of taxes.
"While we should not undermine the importance of enforcement measures in a democratic set-up, compliance through enforcement measures such as investigation and vigilance often yield only moderate results," he said.
The Wipro chairman hailed the rationalisation of slab rates saying "while there is more to be done here, the policy framework and thought process is in the right direction."
He also underlined the need for transparency and accountability in public spending as it enhances public awareness of their role in nation building and would eventually help in increasing the tax base. Premji also underscored the need for technology in making people tax compliant and expressed his pleasure over the technology adoption in the income tax department.
He said the front-end has been completely automated and adding the back-end processes would also be automated soon.
Updated Date: Jul 25, 2018 11:17 AM