Progressivity and redistributive effects of income taxes: evidence from India

Gaurav Datt, Ranjan Ray and Christopher Teh
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Christopher Teh: University of New South Wales

Empirical Economics, 2022, vol. 63, issue 1, No 5, 178 pages

Abstract: Abstract We analyse the progressivity and redistributive effects of India’s income tax system utilizing Income Tax Department data for 2011–18. By fitting Lorenz and tax concentration curves to these data, we find that despite exhibiting high levels of progressivity, the redistributive effects of income taxes remain modest amongst tax assessees and miniscule within the adult population. We also find that plugging the gap between statutory and actual average tax rates will do little to improve redistributive effects, and lowering income thresholds for top marginal tax rates offers greater redistributive and revenue potential than reducing exemption limits or increasing top marginal tax rates.

Keywords: Tax progressivity; Concentration index; Inequality; India (search for similar items in EconPapers)
JEL-codes: D63 E62 H24 H26 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00181-021-02144-x

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