HYDERABAD: As the taskforce to draft a new direct tax law gets cracking, industry and trade officials say a flat rate income tax system is undesirable for a country like India with wide income inequality.The new law is to replace the existing Income Tax Act , 1961. Income inequality in India is one of the highest, with 22 per cent of the national income going to top 1 per cent. "This is one of the highest since the creation of the Income Tax Act... as per a research paper published by renowned economist Thomas Piketty," he said.India's current tax system, according to Balakrishnan, is progressive in nature, with tax rates going up when the income level goes up. "Only with a progressive tax system, such wide income inequalities can be addressed. I believe that a flat tax system will be regressive, considering India's current situation," he pointed out.He spoke of the "great success" of the Russian model of the flat tax system, but "it is not just that which created the miracle".

Source: Economic Times November 30, 2017 08:37 UTC