Structural reforms: now the difficult, fiscal part2 min read . Updated: 02 Dec 2015, 02:35 AM IST
The angst of the Indian industry to the proposed changes in corporate tax structures reinforces a simple fact: fiscal reforms can be quite difficult
The angst of the Indian industry to the proposed changes in corporate tax structures reinforces a simple fact: fiscal reforms can be quite difficult. Such resistance, seen across countries and societies, isn’t hard to understand or explain. Taxation changes influence the real spending and borrowing behaviours of households and firms; they can create both winners and losers depending on how incentives are placed or changed. Removals, reductions, increases or changes often embody an adjustment burden, making fiscal reforms nearly always politically difficult or costly even in normal circumstances. When times are hard, as now—business investment falling and spare capacity in factories rising—people are unhappier, as the domestic industry seems to be.
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