Forget tax increases, reduce spending - Grants and transfers are the third largest expenditure

The public anger at Senate Chairman’s entitlements scratches only the surface of the public spending rut. Budget-making pins hopes on raising taxes to match spending. In the IMF programmes, too, the adjustment focuses on taxes. The result has been the opposite of what was expected. From 13.8% in the 1980s, the tax to GDP ratio declined to 13.4% in the 1990s, 10% in 2000s and to 9.6% in 2010s. It remained low in FY21 at 8.5% and 9.2% in FY22.

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