Mumbai, May 02 (UNI) A development economist from United Kingdom today said that that it is a challenge for all governments to finance their activity without distorting their economy and reducing the incentive to work, save, or consume, all of which are essential for growth.
Delivering the Exim Bank Commencement Day Annual Lecture here on ''Role of the State in Trade and Development,'' Permanent Secretary Department for International Development(DFID) UK Sir Suma Chakrabarti said, there is a tendency for public policy makers to view every increase in revenue as a positive indicator since this will financeinvestment or social development or reduce the need for public borrowing.
He also said there is a tendency for the taxpayer to view every increase in revenue as a negative indicator since this means less net income. ''If public expenditure is inefficient, it is not necessarily going to help development or growth,'' Mr Chakrabarti said adding: ''But more public expenditure is needed in poor countries, and there is only so much that can be financed by public borrowing.'' In developing countries, he continued, there is a large revenue reform agenda to modernise revenue collection. Mr Chakrabarti expressed happiness over the introduciton of VAT(value added tax) at the State level in India in 2005, which has yielded good growth in tax revenue for the state governments. And that this year's budget commits the government to phase in a national goods and service tax in four years time, he added.
Emphasizing that overall revenue to be increased without inhibiting economic growth, Mr Chakrabarti said, ''This will mean spreading the tax burden fairly across different sectors of the economy and not focusing the burden disproportionately on certain activities.'' More UNI SN PP AG2137