Tax compliance
Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Class 12, Ch 3 "Money and Banking"; Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Tax compliance is the extent to which people and firms meet their tax duties: registering, reporting income truthfully and paying on time. Low compliance means less revenue and a heavier burden on honest taxpayers. Class 11 NCERT notes that high income-tax rates were an important reason for tax evasion. Moderate rates and simple procedures encourage people to declare their income voluntarily.
Example
Demonetisation (2016) and GST (2017) are credited with widening the tax net, and the number of people filing returns grew. Whether this reflects real formalisation of the economy is debated. Other tools are faceless assessment (2020), wider TDS/TCS (tax collected at the point of payment or sale) and data analytics.
Don't confuse with
- Tax buoyancy: how fast tax revenue grows compared with GDP. Better compliance can raise buoyancy, but they are different measures.
Related concepts
- Tax avoidance and tax evasion
- General Anti-Avoidance Rule
- Black money
- Money laundering
- Hawala
- Shell company
- Benami transaction