TAX COMPARISON BETWEEN
INDIA & CHINA
PARTIAL FULFILMENT OF THE COURSE
GSIB, GITAM UNIVERSITY
Prof. R.ANITA RAO
Date: Visakhapatnam INTRODUCTION
India has emerged as a trading superpower and as an increasing magnet for FDI. Its role in the international economy to this point has been less remarked than the rise and dominance of China but increasingly India will be appreciated for the opportunities it is creating for its citizens, employers and foreign and domestic firms. Recently, I have been researching on ‘Comparison & Contrast of India & China’. India & China can be compared along many dimensions to better understand the reasons for the disparities in the growth rates, GDP, exports & FDI. A few of the parameters are: * Political Systems
* Monetary Policies
* Fiscal Policies (Tax Regimes)
* Quality of living
* Infrastructure Availability
* Skilled manpower
In this paper, I make an attempt to compare and contrast the TAX LAWS between India and China. I have made the analysis along the following four tax categories: * Income Taxes and Tax Laws
* Tax Exempt Income
* Tax Deductions
* VAT and other Taxes
REVIEW OF LITERATURE
In “Income Inequality and Progressive Income Taxation in China and India, 1986-2015” by Thomas Piketty and Nancy Qian, the authors evaluate income tax reforms in China and India. The combination of fast income growth and under-indexed tax schedule in China implies that the fraction of the Chinese population subject to the income tax has increased from less than 0.1 percent in 1986 to about 20 percent by 2008, while it has stagnated around 2-3 percent of the population in India. Chinese income tax revenues, as a share of GDP, increased from less than 0.1 percent in 1986 to about over 1.5 percent in 2005 and 2.5 percent in 2008, while the constant adaptation of exemption levels and income brackets in India have caused them to stagnate around 0.5 percent of GDP.
In “Tax Systems, Development, Quality of Life: India and China” by Warren D. Miller, the author describes the difficulty in comparing the Tax Structures of the two countries. The author gives some important guidelines to be followed while making the comparisons like collecting data from the same source, using comparable data, the different Tax structures in the two countries etc. The paper also describes the extent of unreliability in the data provided by the two Governments.
In “Doing Business in China and India — A Comparative Study” by Keith E. Kube, the author describes the differences between doing business in India and China in different business models like The WFO, The EJV, The CJV and The RO.
THE TAX SYSTEMS
India has a well developed taxation structure. The tax system in India is mainly a three tier system which is based between the Central, State Governments and the local government organizations. In most cases, these local bodies include the local councils and the municipalities. According to the Constitution of India, the government has the right to levy taxes on individuals and organizations. However, the constitution states that no one has the right to levy or charge taxes except the authority of law. Whatever tax is being charged has to be backed by the law passed by the legislature or the parliament. The main body which is responsible for the collection of taxes is the Central Board of Direct Taxes (CBDT). It is a part of the Department of Revenue under the Ministry of Finance of the Indian government. The CBDT functions as per the Central Board of Revenue Act of 1963.
Tax is the most important source of fiscal revenue of China. It is also an important economic lever utilized by the State to strengthen macro-economic regulation, which produces...