Previous Year Question
Who had suggested an imposition of ‘expenditure tax’ in India for the first time?
Kalecki
Kaldor
R. J. Chelliah
Gautam Mathur
Correct Answer: B
Detailed Solution
The noted economist Prof. Nicholas Kaldor recommended the introduction of an Expenditure Tax as part of reforms to India's taxation system.
The Government of India invited Kaldor in 1956 to study the Indian tax system and suggest tax reforms. The objective was to broaden the tax base, reduce tax evasion and bring economic bases such as wealth and expenditure, in addition to income, within the taxation framework.
Several important direct-tax measures were introduced on the basis of Kaldor's recommendations. These included—
the Wealth Tax Act, 1957,
the Expenditure Tax Act, 1957, and
the Gift Tax Act, 1958.
The basic idea behind an Expenditure Tax was that a person's taxable capacity could be assessed not merely through declared income but also through his or her consumption/expenditure pattern. This could help bring into the tax net income that might not be fully visible under the income-tax system.
India's Expenditure Tax Act, 1957 was associated with this tax-reform exercise. Therefore, the connection between Kaldor and the Expenditure Tax is direct in this question.