Tax and Social Policy – Asia Pooja Rangaprasad, Financial Transparency Coalition 13 August 2015

Overview  Asian Context  South Asian Context  Indian Context

Asian Context

Revenue Mobilisation  Asia-Pacific economies as a group have the lowest tax-GDP ratios of any developing region in the world  Greater dependence of the region’s economies on indirect value- added taxes rather than on direct taxes  Inequality in the region exacerbated by the failure of fiscal policy to play its distributional role Source: UNESCAP, Economic and Social Survey of Asia and the Pacific, 2013

Inequality  743 million people in extreme poverty  Wide difference between Per Capita Incomes in the region  ranges from $409 per person in Nepal to almost $37,000 in Singapore  growing trend in 1990s  poorest 20 per cent of people account for less than 10 per cent of national income  Data from 40 Asia-Pacific countries  net wealth of about 49,000 ultra-wealthy individuals in the region is 17 times the combined GDP of Asia-Pacific least developed countries Source: UNESCAP, Economic and Social Survey of Asia and the Pacific 2015

Illicit Financial Flows  Asia region accounts for almost 40% of total illicit financial flows from the developing world  China, Malaysia, Philippines, India, Indonesia and Thailand among top 15 countries with highest illicit financial outflows. Source: Global Financial Integrity IFFs- Regional Shares in Developing World Total

South Asian Context  Low rates of public revenue collection:10–15 percent of gross domestic product (GDP)  Most South Asian governments have been spending significantly less in social sectors than developing countries in other regions  South Asian countries are consistent underperformers in achieving the Millennium Development Goals (MDGs) Source: WB report on ‘Creating Fiscal Space through Revenue Mobilization’, South Asia Economic Focus, June 2012

Indian Context – Revenue Mobilisation  Tax-GDP ratio at 17% - lowest among BRICS  Regressive: Two-thirds of tax revenue from Indirect Taxes  Tax Exemptions/Incentives: 5-6% of GDP  Almost 70% of FDI inflows through tax havens (Rao and Dhar, 2011)  Round-tripping a challenge  India has one of the most under-resourced and understaffed revenue bodies, in proportion to the size of their population, in Asia (Asian Development Bank 2014)  Staff Shortage- 30,000 (CBDT 2012)

Expenditure  Total Expenditure on Social Services – 26 % of Total Budget. OECD Average- 66%  Public Expenditure on Education – 1% of GDP  Public spending on Health- 1.2% of GDP Source: Centre for Budget and Governance Accountability, India Public Expenditure on Health as % of GDP

Development Indicators Human Development Index135 Adult Literacy Rate63% Population living below $1.25 a day33% Share of working poor, below $2 a day75% Under five mortality rate (per 1000 under five children)56 Population with at least some secondary education, male50% Population with at least some secondary education, female27% Labour force participation rate, male81% Labour force participation rate, female29% Source: UNDP, Human Development Report

Conclusion: Fiscal Policy and Human Rights “Each State Party to the present Covenant undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislative measures” International Covenant on Economic, Social and Cultural Rights (ICESCR), Article 2.1