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Government Budgeting & Public Finance
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What is your understanding of digital tax? Explain the rationale for its introduction in India and discuss the challenges associated with its implementation. (200 words)
Model Answer Understanding Digital Tax and Its Rationale in India What is Digital Tax? Digital tax refers to taxes imposed on digital goods, services, or business activities conducted over the internet. In India, this tax is primarily aimed at non-resident digital companies that generate significantRead more
Model Answer
Understanding Digital Tax and Its Rationale in India
What is Digital Tax?
Digital tax refers to taxes imposed on digital goods, services, or business activities conducted over the internet. In India, this tax is primarily aimed at non-resident digital companies that generate significant revenue from the Indian market, such as Google, Facebook, Amazon, and others. India introduced the Equalization Levy (EL) in 2016, a 6% tax on non-resident digital companies. This was expanded in 2020 to include a 2% Digital Service Tax (DST) on foreign e-commerce businesses with a turnover of over Rs. 2 crore annually (Source: Finance Act 2020).
Rationale for Introducing Digital Tax in India
Traditional tax laws were designed around brick-and-mortar businesses. The rise of digital services created a gap in tax regulations, leading India to introduce DST to better capture revenues from the digital economy (Source: Finance Act 2020).
The introduction of digital tax aligns with global efforts, like the OECD’s BEPS (Base Erosion and Profit Shifting) program, which seeks to reform international tax laws to ensure that digital companies pay taxes where they earn revenue (Source: OECD).
The digital tax ensures that foreign digital companies contribute to the Indian economy, creating a level playing field for both domestic and international businesses operating in India (Source: Government of India).
Challenges in Implementing Digital Tax
The United States has criticized India’s DST, claiming it discriminates against U.S.-based digital companies by excluding domestic companies. This has led to investigations and the threat of retaliatory tariffs, potentially escalating into a tax war (Source: U.S. Trade Representative).
Critics argue that the digital tax may be passed onto consumers in the form of higher prices for goods and services, defeating the purpose of targeting foreign companies (Source: Industry Experts).
International disputes over tax compliance and the absence of a unified dispute resolution mechanism complicate the effective enforcement of digital taxes (Source: OECD).
Developing nations like India have expressed concerns over global agreements that restrict their ability to enact future digital taxes, potentially undermining their sovereignty in tax matters (Source: Government of India).
To address these issues, coordinated global efforts and clear dispute resolution frameworks are essential for the successful implementation of digital tax.
See lessExamine the importance of green accounting and the obstacles faced in its execution within India.
Model Answer Importance of Green Accounting in India Better Policy-making and Sustainable Growth Fact: Green accounting enables informed policy decisions balancing economic growth with environmental conservation. Source: Ministry of Environment, Forest and Climate Change, India. Biodiversity ConservRead more
Model Answer
Importance of Green Accounting in India
Better Policy-making and Sustainable Growth
Biodiversity Conservation
Promotes Innovation
Improved Quality of Life
Enhanced Corporate Social Responsibility
Access to Capital
Obstacles in Green Accounting Implementation in India
Developmental Imperatives
Lack of Reliable Data
Absence of Multisectoral Accounting
Additional Costs
Lack of Accountability
Efforts at various levels are crucial to establish effective policies and incentives for a universal green accounting system in India to ensure sustainable development and preserve natural resources for future generations.
See lessCan you detail the major infrastructure projects announced, particularly in transportation and urban development? How does the budget plan to fund these projects?
According to the Union Budget for 2024-25, India continues to lay the emphasis on infrastructure – transport and urban, releasing ₹11.11 lakh crore for capital spending or 3.4% of the GDP. Major Infrastructure Projects: - Transportation: - Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase IV: DesignedRead more
According to the Union Budget for 2024-25, India continues to lay the emphasis on infrastructure – transport and urban, releasing ₹11.11 lakh crore for capital spending or 3.4% of the GDP.
Major Infrastructure Projects:
– Transportation:
– Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase IV: Designed to establish an all-weather transport link to a current 25,000 eligible rural habitation arising from the population factors.
– Urban Development:
– Transit-Oriented Development Plans: Preparing specific strategies in 14 large metropolitan areas with populations more than 3 million with regards to land use and transport to handle the problem of the sustainable development of urban areas.
– Urban Housing: An outlay of ₹2.2 lakh crore for improving urban infrastructure including housing over the next five and more financial help in the form of interest subsidies to support affordable housing loans.
-Water Supply and Sanitation: Partnership with state governments and multilateral development banks, in water supply, sewage treatment and solid waste management projects in 100 large cities via bankable projects.
Funding Mechanisms:
– Long-Term Interest-Free Loans to States: Allocationing ₹ 1.5 lakh crore for promoting the state-level investments in infrastructures encouraging the cooperative federalism in developmental sector.
– Private Sector Participation: To facilitate private investment in the infrastructure sector by encouraging measures such as viability gap funding, enabling policies & regulations for market based financing of infrastructure projects.
– Fiscal Support: The large capital outlay is backed by a receipt from the Reserve Bank of India to ensure the government sustains robust fiscal support for infrastructure in the period up to the Financial Year 2019- 20.
The aforementioned efforts depict a global framework on infrastructure advancement; with the principal goal of boosting economic development, transport connections and standards of living of inhabitants in India’s urban structures.
See lessWomen empowerment in India needs gender budgeting. What are the requirements and status of gender budgeting in the Indian context? (2016)
Gender Budgeting in India: A tool for womans empowerment Gender budgeting is an analytical instrument that guarantees the autonomy of gendered money resources in public sector financing. There is prioritizing of the budgets provided by governments based on the gender differences that come with partiRead more
Gender Budgeting in India: A tool for womans empowerment
Gender budgeting is an analytical instrument that guarantees the autonomy of gendered money resources in public sector financing. There is prioritizing of the budgets provided by governments based on the gender differences that come with particular budgets, and then the resources are provided to negate the affected gender differences.
Requirements for Effective Gender Budgeting:
1. Gender-Sensitive Budgeting: This consists in identifying of the quantitative sex needs and then distribution of the characteristics accordingly.
2. Data Disaggregation: Aggregating the data by sex, and comprehending gender differences.
3. Capacity Building: Implementing Gender Budgeting principles and Techniques for Head of Civil Service Trainers and other government officials.
4. Institutional Mechanisms: Implementation of a process similar to or known as the establishment of gender budgeting cells or units in each and every governmental department.
5. Public Awareness: Informing the public on the existence of gender budgeting and the reason for implementing this process.
6. Monitoring and Evaluation: Conducted Periodic Reviews of the contextualization and general application of gendering budgeting measures.
Status of Gender Budgeting in India:
India too has gone some way in the direction of gender budgeting. Significant developments are:
-Institutionalization: The gender budgeting cells have been created in ministries and departments.
-Data Collection and Analysis: An attempt is being made to compile and study gender-break down data.
-Policy Integration: Several of the government policies and programs are adopting gender budgeting factors and policies.
-Public Awareness: Awareness can be initiated trough organizational and educational campaigns, where workshops are being carried out for the population.
But a lot still has to be done to ensure that gender budgeting is optimally realised in India. These are:
-Adequate Data: Absence of data about concrete requirements and consequencies of gender.
See less-Capacity Constraints: Lack of capacity within government departments render the gender budgetary instruments ineffectual.
-Political Will: The female budgeting exercise is most effective when there is long-term political support.
Economics
Implementation of High Taxation ‘Policies’ in India: Do They Yield Enough Return to the Public?In other words, does the humongous sum paid as taxes by the Indian citizens ever commensurate with the services and other infrastructural returns? With people contributing nearly 20 per cent of the indirecRead more
Implementation of High Taxation ‘Policies’ in India: Do They Yield Enough Return to the Public?
In other words, does the humongous sum paid as taxes by the Indian citizens ever commensurate with the services and other infrastructural returns? With people contributing nearly 20 per cent of the indirect and direct taxes, the expectation from the citizens’ perspective, is effective management, quality services, and facilities.
Tax Utilization Challenge
See less1. Inadequate Public Services: Health, education, and law enforcement services are poorly developed and managed, forcing people to rely on the private sector.
2. Wastage and inefficiencies: Corruption and administrative ineffectiveness rendered all these spending useless.
3. Tax Compliance: Direct tax collection has been low, with as few as 1% of Indians being tax compliant; hence the compliant taxpayers bear a higher burden and offer complacency to the non-compliant ones.
Progress and Positives
1. Infrastructural growth: Investment in construction of highways, metro rail, and digital infrastructure; a positive indication for the utilization in application of some of these resources.
2. Welfare schemes: Disadvantaged sections are reached out by this programs but their implementation is not even,
With the exception of a few sectors which have some developments, the return is not commensurate with the exorbitant taxes collected. Better efficiency, broader tax base and accountability in all public spending will eliminate this difference.
Women empowerment in India needs gender budgeting. What are the requirements and status of gender budgeting in the Indian context? (200 words) [UPSC 2016]
Women Empowerment in India and the Role of Gender Budgeting Requirements of Gender Budgeting: Dedicated Allocation: Gender budgeting requires specific financial allocations to address the needs of women and promote gender equality. It ensures that a portion of the budget is allocated to programs dirRead more
Women Empowerment in India and the Role of Gender Budgeting
Requirements of Gender Budgeting:
Status of Gender Budgeting in India:
Conclusion:
Gender budgeting is essential for empowering women in India by ensuring targeted financial support and integrating gender considerations into policies. While significant progress has been made, continued efforts are needed to enhance its effectiveness and address existing challenges.
See lessComment on the important changes introduced in respect of the Long-term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018-2019. (150 words) [UPSC 2018]
Changes in Long-term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in Union Budget 2018-2019 1. Long-term Capital Gains Tax (LCGT): Introduction of Tax: The Union Budget for 2018-2019 reintroduced a 10% tax on long-term capital gains exceeding ₹1 lakh. This tax was applicable on gainsRead more
Changes in Long-term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in Union Budget 2018-2019
1. Long-term Capital Gains Tax (LCGT):
2. Dividend Distribution Tax (DDT):
These reforms were designed to address issues of tax equity and compliance, and they significantly impacted both individual investors and corporations.
See lessThe public expenditure management is a challenge to the Government of India in the context of budget making during the post-liberalization period. Clarify it.(250 words) [UPSC 2019]
Public Expenditure Management Post-Liberalization 1. Context of Post-Liberalization Period: Economic Liberalization: The post-liberalization era in India, starting in the early 1990s, brought significant economic reforms aimed at enhancing market efficiency and global competitiveness. This period saRead more
Public Expenditure Management Post-Liberalization
1. Context of Post-Liberalization Period:
2. Challenges in Public Expenditure Management:
3. Recent Examples:
4. Measures to Address Challenges:
In conclusion, managing public expenditure in the post-liberalization period requires balancing economic growth, social needs, and fiscal discipline while adapting to changing economic dynamics and ensuring effective use of resources.
See lessDistinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (150 words) [UPSC 2021]
Capital Budget और Revenue Budget के बीच अंतर **1. मुख्य अंतर: Capital Budget: यह बजट दीर्घकालिक निवेश और पूंजीगत खर्चों को दर्शाता है, जैसे कि विकास परियोजनाएँ, इन्फ्रास्ट्रक्चर और अस्थायी संपत्तियों की खरीद। इसका उद्देश्य स्थायी संपत्ति का निर्माण और मौजूदा संपत्तियों का नवीनीकरण है। Revenue BudgetRead more
Capital Budget और Revenue Budget के बीच अंतर
**1. मुख्य अंतर:
**2. Capital Budget के घटक:
**3. Revenue Budget के घटक:
उदाहरण: वित्तीय वर्ष 2021-22 में, राष्ट्रीय अवसंरचना पाइपलाइन योजना के तहत सड़क निर्माण और आवास परियोजनाएँ Capital Budget का हिस्सा थीं, जबकि स्वास्थ्य और शिक्षा के लिए खर्च Revenue Budget में शामिल थे।
निष्कर्ष: Capital Budget दीर्घकालिक निवेश और स्थायी विकास को फंड करता है, जबकि Revenue Budget रोजमर्रा के खर्चों और सेवाओं के लिए आवंटित होता है। दोनों बजट सरकार की वित्तीय योजनाओं और प्राथमिकताओं को दर्शाते हैं।
See lessAnalyze the government's strategies to leverage innovative financing mechanisms, such as green bonds, social impact bonds, and crowdfunding, to mobilize additional resources for development projects and social welfare programs, and evaluate their potential to complement traditional budgetary resources.
Government Strategies to Leverage Innovative Financing Mechanisms Innovative financing mechanisms, such as green bonds, social impact bonds, and crowdfunding, have emerged as pivotal tools for mobilizing additional resources for development projects and social welfare programs. These mechanisms offeRead more
Government Strategies to Leverage Innovative Financing Mechanisms
Innovative financing mechanisms, such as green bonds, social impact bonds, and crowdfunding, have emerged as pivotal tools for mobilizing additional resources for development projects and social welfare programs. These mechanisms offer potential to complement traditional budgetary resources and enhance the effectiveness of development initiatives.
1. Green Bonds
Definition and Purpose: Green bonds are debt instruments issued to raise funds specifically for projects with environmental benefits. The proceeds are used for projects that address climate change, reduce carbon emissions, or improve environmental sustainability.
Recent Examples:
Impact and Potential: Green bonds attract investment from both domestic and international markets, providing a substantial pool of funds for environmental projects. They complement traditional funding by tapping into a niche market of investors interested in sustainable development, thus bolstering the budgetary resources allocated to environmental sustainability.
2. Social Impact Bonds (SIBs)
Definition and Purpose: Social impact bonds are a type of contract where private investors provide upfront capital for social programs and are repaid by the government only if the programs achieve predefined social outcomes. They are designed to improve social outcomes while shifting the financial risk away from public funds.
Recent Examples:
Impact and Potential: SIBs align financial incentives with social outcomes, encouraging innovation and efficiency in service delivery. They provide a mechanism to address social issues without upfront public expenditure, thereby complementing traditional budgetary resources and fostering public-private partnerships.
3. Crowdfunding
Definition and Purpose: Crowdfunding involves raising small amounts of money from a large number of people, typically via online platforms, to fund development projects or social initiatives. It democratizes the funding process and allows direct participation from the public.
Recent Examples:
Impact and Potential: Crowdfunding harnesses public engagement and broadens the resource base beyond traditional institutional funding. It allows for community-driven initiatives and can complement traditional resources by providing additional capital and raising awareness about various causes.
Evaluation of Complementary Potential
Advantages:
Challenges:
In conclusion, innovative financing mechanisms offer valuable opportunities to complement traditional budgetary resources by providing additional funding, enhancing efficiency, and fostering public engagement. Their successful integration into development strategies can lead to more sustainable and impactful outcomes for social welfare programs and infrastructure projects.
See less