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Prime Minister Faces Backlash Over Controversial Tax Reform Proposal

Prime Minister Narendra Modi's administration is encountering significant opposition following the introduction of a comprehensive tax reform proposal aimed at simplifying India's tax structure. While the initiative seeks to streamline tax compliance and enhance revenue generation, it has sparked criticism from various quarters, including state governments, opposition parties, and business communities.

Key Aspects of the Tax Reform Proposal

The proposed tax reforms encompass several measures designed to modernize India's tax system:

Simplification of Tax Slabs: The introduction of fewer tax brackets aims to reduce complexity and make the tax system more user-friendly.
Digitalization of Tax Filing: The proposal includes provisions to mandate digital tax filing, intending to improve efficiency and reduce errors.
Enhanced Surveillance Measures: To curb tax evasion, the reform suggests increased surveillance of financial transactions and digital activities.

Sources of Backlash

State Governments' Concerns: Several state finance ministers have expressed apprehension regarding the potential impact of the reforms on state revenues. They argue that the centralization of tax powers could diminish states' fiscal autonomy and lead to revenue shortfalls.
Opposition Parties' Critique: The opposition Congress party has criticized the proposal for favoring the affluent, alleging that it disproportionately benefits the wealthy while neglecting the needs of the underprivileged.
Business Community's Apprehensions: Industry leaders have voiced concerns about the increased compliance burden and the potential for bureaucratic overreach. They argue that the reforms could lead to "tax terrorism," deterring investment and hindering economic growth.

Government's Defense

Finance Minister Nirmala Sitharaman has defended the proposal, emphasizing its potential to enhance tax compliance and reduce the tax burden on the middle class. She highlighted that the reforms aim to simplify the tax structure and promote transparency. However, she acknowledged the challenges in convincing bureaucrats about the feasibility of the proposed changes