Major findings show that there appears to be a relationship between some components of compliance costs, including bribes and compliance. which exert a negative effect on tax revenue. Money compliance costs. bribes. and use of tax advisers were found to affect compliance adversely. However, the opposite is true for third party costs via the TDS. Time costs may, also positively affect compliance. For non-filers. a theoretical model was developed to study the impact of compliance costs on return filing behaviour. Implementation of a more extensive TDS. reducing the scope for avoidance, closer regulation of tax practitioners, increased automation of taxpayer records. and improved use of third party information are some of the important policy recommendations of the study.

The study highlights salient features of the system of sales tax in Andhra Pradesh. and of an ideal system of value added tax (VAT). It also identifies features of the former impacting upon the base. specifies methodology for computing revenue neutral rates (RNRs) of VAT. and works out RNRs of VAT with alternative feasible options of VAT design for the state of Andhra Pradesh. Alternative options have been designed to explore the impact of removal of central sales tax (CST), zero rating of all inter-state transactions, and alternative VAT thresholds on RNRs of VAT. The study reveals that it is feasible for the Government of Andhra Pradesh to adopt an ideal VAT (that is. with zero-rating of exports and all inter-state transactions including inter­state branch/consignment transfers, and with removal of CST), but with special additional tax on a few goods of demerit, without sacrifice in revenue. The required RNR of VAT need not exceed 12.5 percent.

This paper calculates per hectare rates of levy for a land-based crop-specific agricultural tax on eight major field crops, based on published cost of cultivation data, now available at state-level for the nineties but with uneven coverage across states. The eight crops are paddy, wheat, groundnut, rape/mustard seed, sugarcane, cotton, potato, and onion. Clearly, any reconfiguration of input subsidies presently available to agriculture will alter the taxable surplus parameters and levy rates estimated, but the method used is of perfectly general applicability. The state-level rates of levy calculated for the year 1996-97 yield an estimated tax revenue of Rs 500 crore, around 80 percent of aggregate land revenue collected that year from agricultural land. The levy is envisaged for panchayat rather than state-level, with jurisdictional retention for infrastructure improvements within agriculture. District-level rates of levy, with taxable surplus parameters adjusted for crop yield variations across districts, are calculated for four selected states: Andhra Pradesh, Punjab, Rajasthan, and West Bengal. Revenue additionality at panchayat level as a percent of own revenue collections, aggregating across all panchayat tiers, ranges between 30 percent in Andhra, and 201 percent in West Bengal.

The report covers the following aspects:

- investment and cost implication for upgrading of selected refineries in India for producing automotive fuels conforming to euro norms;

- implications of differentials in environmental standards for products across locations;

- impact of upgradation on competitiveness of refineries with different vintages of technology and capacity;

- pricing option for differential environment quality in the light of international experience; and

cost sharing for quality upgradation among stakeholders.

Pollution from industries constitutes a considerable part of the total pollution in India. But reliable information on the nature and level of emissions by plants/factories is not available. This makes it difficult for regulators to come up with cost effective strategies - for industrial pollution control. Therefore, the need is to adopt alternative ways for estimation of environmental parameters as complements to direct measures of such parameters at the firm level. This report uses one such alternative of estimating these parameters from information on pollution intensities and abatement costs from secondary sources. The study suggests introduction of a water pollution charge and recommends that the regulator should prioritize monitoring effort and allocate monitoring resources more efficiently by targeting industries characterized by relatively high effluent discharges and low costs of pollution abatement.

This paper deals with the continuing difficult position of government finances at the state level. The genesis of these problems. and their consequent inability to spend on developmental activities in general. and more specifically on the heavily needed infrastructure facilities. The study discusses recent developments in this area and provides broad suggestions for reform.

Income tax compliance costs for companies are costs they incur in meeting their obligations under the income tax law including costs associated with tax planning and opportunity costs arising out of delayed tax refunds. Gross compliance costs of company income taxation based on a sample of 45 companies in India for 2000-01 are estimated to be between 5.6 and 14.5 percent of corporation tax revenues. However, tax deductibility of legal expenses and cash flow benefits result in net compliance costs to companies between minus 0.7 and plus 0.6 percent of corporation tax revenue are at around 2 percent. if opportunity costs are included. Costs are regressive and are negative mainly for larger companies. Tardy refunds. budget process and the frequency of administrative notifications along with tax ambiguity and complexity are the main contributors to compliance costs. Some of the reform suggestions include streamlining refund procedures, improving taxpayer services and tax enforcement, reducing discretionary powers of tax officials, reducing costs of policy environment by reforming the budget process, and the issue of administrative notifications.

This paper published in the India Infrastructure Report 2003, deals with the problem of the heavy debt burden of the states in India and suggests institutional changes to limit the incentives for over-borrowing by states, and to minimise indiscriminate borrowing.

The report examines the dimensions of fiscal correction required for the state of Punjab and implied correction in levels of expenditures, given the feasible potential for revenue mobilisation. Given the targets so derived at the aggregate level. the report suggests the need for containing the size of public sector employment and provides some estimates of the fiscal impact of a VRS programme over a medium-term, establishing the viability of such a programme, Following up on this initiative, the report proposes an alternative way of organisation of business in a few import sectors of state, specifically, education, PWD (roads and bridges). health. Irrigation police services. state road transport. and power.

The study aims at a diagnosis of the existing degree of gender-inequality in India through gender-segregation of the relevant macrodata; valuation of the existing non-NAS unpaid work of women; and gender-disaggregated benefit incidence analysis of public expenditure. and to prescribe policy suggestions to build a gender-sensitive national budgeting process.

Fiscal situation in the state of Manipur is both precarious and unsustainable. The economy is overwhelmingly dependent on the state government for developmental activities and the government. in turn. depends crucially on the centre for resources. The challenge in Manipur lies in breaking the vicious cycle of underdevelopment. militancy. and dependency. The study adopts a comprehensive analysis of the state's developmental potential to identify areas of possible fiscal reform. It further suggests both short-term fiscal measures to tide over the fiscal crisis and medium term development strategies to ensure balanced development of the state economy. The fiscal reform package includes expenditure rationalisation. resource mobilisation. and restructuring of the state level public sector enterprises. The development strategy emphasises upon collective effort with people's participation in developmental activities and an exemplary level of governance with a view to improving the effectiveness of the government in the delivery of public goods and services.

Undertaken at the instance of the Ministry of Finance (Government of India), the study has reviewed the system of classification of budget and accounts of municipal governments, and made recommendations on a new system of classification for maintaining municipal accounts. The proposed system is in conformity with similar systems existing at other governmental levels, and is able to highlight the financial position of local governments.

The study was guided by three main considerations

it lacked standardisation with the result that it was not able to provide a comparable assessment of the finances of municipal governments;

there existed no system in the country for regular collection and maintenance of local finance data.

The study is planned to provide guidance on design of VAT for Orissa. Accordingly, it is focused on identifying features of the system of sales tax in Orissa impacting upon the value added tax (VAT) base, developing methodology for computing revenue neutral rates (PNRs) of VAT, and computation of PNRs of VAT with altertive feasible options of VAT design for Orissa, The altertive options are designed to explore the impact of removal of central sales tax (CST), zero rating of all inter-state transactions, and altertive VAT thresholds on the PNR of VAT.

This study was sponsored by the World Bank along with some other studies for the conference on India: Fiscal Policies to Accelerate Economic Growth, held at New Delhi during May 21-22, 2001. It considers the issue of the persistently worsening fiscal imbalance at the state level, identifies long- and short-term contributory factors and the accommodating institutional setup. Among the corrective measures, it highlights ways of keeping a check on sub-national indebtedness as an option not given adequate coverage in Indian literature. This study advocates a mix of administrative rules-based and market­ based control of subnational debt, arguing that exclusive reliance on anyone type of control will probably neither be feasible, nor effective.

The development of Assam is critical for the development of India's northeast. Assam alongwith other north-eastern states shares the problems of remoteness, and hilly terrain with associated high transportation costs. Assam's finances are vulnerable to the interplay between inherent weaknesses in the economy and critical exogenously driven fiscal shocks. Assam has already experimented certain fiscal reforms which had partially succeeded upto 1998-99. Subsequently, with growing expenditures, the state has landed in an unprecedented fiscal crisis. Fiscal deficit as a proportion to GSDP was as large as 7.25 percent of fiscal deficit for current expenditures.

This study provides two sets of projections. The first set indicates the implication of continuation of the existing trends. Without reforms, the debt to GSDP ratio rises to about 52 percent and fiscal deficit becomes as large as 8.5 percent, highlighting the need for urgent reforms. In the second set, the study suggests an eleven fold reform package covering areas ranging from taxation, improving recoveries in non-tax revenue, salary and pension reform, reforms in subsidy with better targeting, reforming planning strategy, debt management and control, augmentation of capital expenditure relative to GSDP, restructuring public enterprises, target based control of revenue and fiscal deficits, besides budgeting reforms.