Assistant Professor, Economics, D.A.V. College for Girls, Yamuna Nagar
Online published on 19 May, 2016.
Taxes are compulsory contributions imposed by the government on its citizens to meet its general expenses incurred for the common good, without any corresponding benefits to the tax payer. A fund raised through the various taxes is referred to as tax revenue. Taxes constitute a significant part of public revenue in modern public finance. Taxation is an important tool to enhance the economic development and to finance the expenditure responsibilities of a government. Taxes have macro-economic effects. Taxation can affect the size and mode of consumption, pattern of production and distribution of income and wealth. This paper attempts to measure the tax capacity and tax effort of 15 major Indian states from 2010–15. This paper helps to identify those states which are operating near their tax capacity and states which areaway from tax frontier. The results indicate presence of large variation in tax effort of different Indian States.
