Direct tax reform in privatizing economies: A comparative study of India and Latin American countries

Argues that direct tax reform in India should include elimination of income tax and capital gains taxes. Presents an analysis of how the unbelievably high direct tax rates over several years, coupled with several types of controls, drastically distorted the price and incentive system. Shows that, in comparison with several other developing countries, India is still a high taxed economy. The institutionalized corruption resulting from these direct taxes over several years cannot be reduced without elimination of these taxes, and measures such as broadening of direct tax base, higher penalties, etc. are counter-productive. The official national accounts statistics in such a high tax regime do not reflect the economy, and the government policy and planning based on these statistics often proved ineffective. The success of liberalization programmes, environmental conservation, and general socio-economic development requires the elimination of these taxes.