[Answered] Discuss the role of tax transparency in nurturing sustainable growth in the Indian economy. How can it act as a catalyst for sustainable growth?

The practice of making tax-related data, information, and processes available to the general public, interested parties, and appropriate authorities is known as tax transparency. It entails giving precise and thorough information regarding a business or person’s tax obligations, payments, deductions, and other related financial data.

How can tax transparency act as a catalyst for sustainable growth?

• Accountability: Individuals and corporations are held responsible for their tax commitments by transparent tax processes. It assists in making sure that they appropriately declare their revenue and financial operations following tax laws and regulations.
• Investment: The tax transparency framework leads to tax disclosures of the corporates which help attract more investment from foreign players who value transparency and responsible tax behaviour over the single-minded pursuit of profits.
• Economic Growth: Tax transparency creates an enabling situation for influx of capital which can be used to create job opportunities for citizens, enhance economic growth, and contribute to the country’s overall GDP.
• Push to green energy and infrastructure: Foreign investors take note of environmental, social, and governance (ESG) indicators to invest in domestic companies. Increased capital inflows will benefit India from its advocacy of tax transparency, especially in fields like infrastructure and renewable energy.
• Align tax policies with environmental objectives: The Business Responsibility and Sustainability Report (BRSR) Core, which aims to increase the dependability of ESG disclosures by the top listed businesses, was introduced by the Securities Exchange Board of India in response to the growing acknowledgment of the significance of ESG-related disclosures. Companies may, for instance, disclose environmental charges on carbon emissions, plastic use, garbage disposal, and water use. By doing this, firms can be encouraged to adopt greener practices, balancing environmental goals with economic growth.
• Corporate Governance: Under governance disclosures, tax transparency might encourage businesses to connect their ESG policies with tax behavior. The social dimension of tax transparency reporting could reveal insight into a company’s commitment to social insurance, healthcare, and pension premiums. Companies can achieve this by improving tax reporting and stepping up stakeholder communication to promote strong corporate governance procedures, accountability, and transparency.

Conclusion:

While tax reforms and schemes from Government like the “Transparent Taxation — Honouring the Honest” platform, have aimed to ease the compliance burden and reward honest taxpayers but the country also needs a voluntary tax transparency framework for companies to solidify India’s economic foundations and cultivate a business environment centred around integrity. Such a framework can drive India’s economic growth to a $ 5 trillion milestone, raise per capita income & facilitate ease of doing business.