Finance minister Pranab Mukherjee wants to double the level of direct tax collections to gross domestic product ( GDP) to 12%. A sound goal, all right. Garnering a higher share from direct taxes serves the cause of equity as indirect taxes take away a larger shareof income from the poor. Sustained high growth, tax reforms and a modern networked tax administrationhave helped enhance the share of direct taxes in gross tax collections from 19% to 60%, since the reforms began.
However, the government cannot rest on its laurels. With economic growth slowing down, the Centre's direct tax-to-GDP ratio fell less than 6% for 2011-12 against 6.28% in 2007-08 before the crisis broke out. Reforms alone can increase this ratio further.