Tax Collection Efficiency of Indian States: A DEA Approach

Abstract

The study has measured the tax collection efficiency of Indian states in pre-GST era and tried to find out solutions to tackle inefficiency. In order to estimate relative efficiency score, input-oriented data envelopment analysis (DEA) model has been applied for seventeen general category states (GCS) and eleven special category states (SCS) separately. The study has found that first, GCS are 54% and SCS are 72% relative efficient. Second, there is a positive and significant correlation between efficiency score and tax collection per Indian rupee expenditure. Third, efficiency score has positive correlation with literacy rate and negative correlation with percentage of household experienced corruption. Therefore, the study has fixed a target for the new tax regime to achieve 100% tax collection efficiency in use of inputs by using extensive Information and Communication Technology (ICT) for handling corruption in one hand and by introducing tax education at high school level in order to enhance public awareness about taxation on the other hand.