Government‟s role in strengthening ethical standards of the tax payer :

The most important factor which would increase the ethical quotient of the tax payer is the increase in the level of trust reposed by the tax payer on the Government. If the tax payer is convinced that the tax he pays is put to productive use in the economy, of which he is an important part, his compliance with tax laws would go up substantially.

taxes act as a deterrent to the tax payer from disclosing his full income. It may be noted that keeping this factor in mind, the rates of income-tax have been reduced and exemption limits have been increased over the last few years. This has improved compliance and increased tax revenue substantially.

The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) was introduced to provide for the responsibility of the Central Government to ensure inter -generational equity in fiscal management and long-term macro-economic stability by achieving sufficient revenue surplus and removing fiscal impediments in the effective conduct of monetary policy and prudential debt management consistent with fiscal sustainability through limits on the Central Government borrowings, debt and deficits, greater transparency in fiscal operations of the Central Government and conducting fiscal policy in a medium-term framework and for matters connected therewith or incidental thereto. The Economic Survey 2013-14 has called for a new FRBM Act with fresh goalposts for high quality fiscal adjustment based on improvements in both tax and expenditure.

Government expenditure reform must focus on three elements — shifting subsidy programmes to income support, a change in focus of government spending towards provision of public goods and a focus on outcomes through an improvement in systems of accountability. These measures would effectively fulfill the responsibility of the tax collector and contribute to increase in the ethical standards of the tax payer.