Burden of taxation in tamil nadu with special reference to sales tax

Abstract

Taxes affect the households and fortunes of business. By transferring newlineresources from private use, taxes often distort the choices of consumers and newlineexpenditure pattern. Tamil Nadu state which accounts for four per cent of the newlineland area and seven per cent of the population in India is the first state in the newlinecountry to introduce a general sales tax in its present form way back in 1939. This newlinestudy attempts to estimate the burden of tax in general and sales tax in newlineparticular. This study covers a period of 25 years from 1981-82 to 2004-05, for newlineestimating and comparing the burden of different taxes in Tamil Nadu. For newlineestimating the burden of sales tax in Tamil Nadu, the cross section analysis is newlineconfined to the year 2005. Unit level data as published by the National Sample newlineSurvey Organisation (NSSO 61st Round Survey) was used to estimate and newlinecompare the inter-regional and inter-sectoral distribution of burden of sales tax. newlineInter-temporal distribution of burden of various taxes in Tamil Nadu and interregional newlinedistribution of burden of sales tax also form part of this analysis. Sales newlinetax is the most burdensome tax inter-temporally and sectorally in Tamil Nadu. newlineThe indirect taxes are more burdensome than direct taxes in Tamil Nadu. Interregional newlineand inter-sectoral distribution of burden of sales of tax among rural newlinehouseholds reveals that Nilgiris district bears the minimum burden. Intersectoral newlinemaximum burden is shouldered by the urban households of Sivaganga newlinedistrict which is nearly twice as the state average maximum burden.