Taxation—Principles and Applications
Parthasarathi Shome
Publisher: LexisNexis
Pages: 824; Price: Rs.1495
Parthasarathi Shome is the Director and Chief Executive, Indian Council for Research on International Economic Relations, New Delhi. He was Chief Economist, Her Majesty’s Revenue & Customs (HMRC), United Kingdom (2008-11) and Adviser to Indian Finance Minister (2004-08).He served as Chairman, Empowered Committee for Computerisation of the Tax departments. He distinguished himself in the International Monetary Fund for twenty years as the first Senior Economist in the Office of the Managing Director, Chief of Tax Policy and Director, IMF Singapore Institute.
He was Professor of Economics at American University, Washington for eight years. He has provided technical assistance to over thirty countries in Africa, Asia, Europe and Latin America. He chaired India’s Ninth Five Year Plan and Tenth Five Year Plan Advisory Groups on Tax Policy and Administration. He was Director, National Institute of Public Finance and Policy for two years. He was awarded the highest civilian honour of the Brazilian government, Commander of the Order of the Southern Cross, for his contributions to Brazilian tax reform. He has published in several respected journals. His doctoral thesis was on the burden of the corporation income tax, He bagged the National Tax Association of America award for “outstanding student of taxation and public finance”.
The book under review is a Compendium of his selected writings based on four decades of authorship, from a collection of over seventy papers. The selection represents a progression of his thought and research. What we have is a veritable cornucopia providing accurate information on a variety of topics germane to taxation. Shome provides material on the principles of taxation, the development of analytical methodologies and application in practice and lessons from implementation for tax administration. We have country and regional experiences with a view to analyse structural reform movements in taxation that thoroughly discusses the role of tax policy in economic development with special reference to Africa, East, North and South Asia, Europe, Latin America and North America.
The book is divided into eight sections. The first furnishes an overview with historical references to India. It surveys principles of taxation that ought to be observed and mourns the deviations noticed. It throws light on the difficulties faced by developing economies in collecting tax revenues with special emphasis on how Latin America tackled effectively such problems in the 1980s.
The second Section is dedicated to the issue of incidence and distribution effects of taxation. Distribution was used in the context of studying taxation’s effects with the help of expenditure and income surveys. Incidence was used in the context of computable general equilibrium models.
Section Three is dedicated to the effects of taxation on the efficiency of resource allocation and consequential aspects. It analyses the impact of inflation on increasing effective tax-rate using the example of Botswana. The next Section focuses exclusively on taxes on consumption and production –or indirect taxes. There is a critical analysis of VAT—Value Added Tax and GST—Goods and Services Tax. The Section also demonstrates a detailed method of calculating evasion of the VAT using an input—output table for the economy applying it to Mexico and Colombia.
“Innovations in Taxation” are discussed in the Fifth Section. A range of taxes as well as emerging issues in international taxation are covered here — especially highlighting the experience in India, Brazil, the European Union and the United States. Regional developments in international taxation are also discussed thoroughly. Section Six is devoted to experiences of individual countries or different regions. India’s revolution in tax policy reform in the 1990s is studied in depth. The Section has also examined the ground of tax reform in the US by reviewing an individual proposal to cull 100 million tax filers from the bottom and replacing it with a VAT. The Seventh Section studies issues in tax administration. India’s experience with Tax Deducted at Source (TDS) of Income Tax has been studied carefully.
The “cash transactions tax” and “fringe benefits tax” which proved highly unpopular and were removed are also considered in depth. Tax policy reform can be implemented only if we have commensurate advancements in tax administration. The Final Section sums up the essentials of optimal tax design as they have emerged over time.
In his Foreword Daniel Witt, President of the International Tax and Investment Centre warmly commends the Compendium to undergraduate and graduate students as also the growing teaching and research community. Government officials in charge of fiscal policy in the Finance Ministry will also profit from studying this Compendium. All scholars and practitioners of public finance will gain greatly by reading this volume. The book has a rich Reference Material of both books and articles.
