Taxation as an Invisible Controller: Examining The Hidden Power of the Tax State in India

Abstract

While taxation has traditionally been regarded as the source for the generation of revenue for public expenditure and welfare measures by the State, its scope and reach are not limited only to that. The regulation and control of financial activities by the State through taxation involves the making of economic choices, the regulation of financial activities, mandatory disclosures and constant interplay between private citizens, businesses and the government. It can be said that taxation acts as an invisible controller as the influence and control of the state through taxation occurs in an indirect manner through incentives, disclosure and reporting requirements, compliance with tax law and the fear of the consequences of breaching tax law. In India, with the digitalization of tax administration, the capacity of the state to collect and analyse information about finances of people has increased greatly. In this article, the topic of the tax State in India will be viewed from a legal and theoretical standpoint, and an examination will be made on the effects that taxes can have on the behaviour of individuals and the economy. The constraints on state power under the Constitution of India shall also be taken into consideration in order to find a balance between efficient administration and taxpayers’ rights.