An Income Tax Laffer Curve - The Indian Experience

Abstract

With a view to know whether the Indian Economy is on the downward-sloping portion of the Laffer Curve an attempt has been made in the present exercise by a simple methodology. The estimates of elasticities of income tax revenue with respect to peak marginal rate of income tax are persistently negative and drastically declined on account of reduction in peak marginal rate of personal income tax from 50 per cent in 1991-92 to 40 per cent in 1992-93 confirming the validity of the thesis of the negatively slopped region of the Laffer Curve in India.