Local Self Government And Financial Challenges

Ashutosh Tripathi, Asst.Prof School of Law, UPES

1. INTRODUCTION

The Indian tax structure has been subjected to numerous changes since Independence to have a structure that fulfills all the necessary conditions. However, these reforms have continued even today and thus lead to a variety of changes. But even after all these changes India still does not have uniform tax structure.

Taxes are a form of fee paid by citizens including organizations for the economic development and smooth functioning of all the services provided to them. Revenues form the basis of all expenditures incurred for the growth and development of a nation. That is why Kautilya, the great India Philosopher, remarked “all undertakings depend upon finance, hence foremost attention should be paid to the treasury1. The revenue generated in the form of taxes eventually comprises of the budget which then prescribes the allocation of funds for various needs of the nation. This revenue is usually incurred from taxes, services fees and other charges.

For the purpose of economic growth and the need to correct the fiscal imbalances many tax reforms in India were adopted. The main purpose of all these reforms was to promote the integration of the nation’s economy into the world economy. The transition to a market economy to smoothen the participation of markets in strengthening the economy of the nation was another reason for these tax reforms. These reasons created a much needed environment of tax reforms as a response to globalization. As a result India also realized this necessity and decided to move from a centralized structure to an open economy by the 1990 LPG reforms. A record number of committees looked into this matter and drafted the various changes which lead to the current tax regime. Though the problem essentially was that how to create a structure for such a large nation and to effectively generate revenue from all the entities of the nation.