ROLE OF TAXATION IN REDUCING INCOME INEQUALITY: AN ANALYSIS OF THE DUAL TAXATION SYSTEM IN INDIA

Taxation is one of the most powerful mechanisms used by the government for minimizing income inequality. The adoption of the progressive taxation system along with its use for funding welfare schemes by the government can lead to an equitable society socially and economically. In India, there is the existence of a dual taxation system wherein the tax is collected both by the central government and the state government, which makes it easy to allocate the tax revenue towards developmental projects, education, health care, and welfare schemes.Although there are numerous advantages of taxation to employment in that it creates jobs for the government, being used in the construction of roads, railway lines, and educational institutions, among others, at times, taxation has its drawbacks too, and one of those is that high taxation raises the cost of doing business and hence limits investments, thus affecting employment opportunities. It lowers consumer spending if the publics pocket is pinched; then the demand for goods and services will fall, directly reducing the sales of businesses. In conclusion, taxation is an important tool for promoting social and economic equity. A balanced and efficient tax system can reduce inequality while supporting economic growth. Proper implementation of the dual taxation system is essential for inclusive and sustainable development.