"The intricate relationship ship between growth and inequality poses challenges for the formulation of tax policy in both developed as well as developing countries," said Union Finance Minister, Mr. Pranab Mukherjee, addressing 400 delegates at the 4th international tax dialogue global conference on the theme ‘TAX AND INEQUALITY‘ in Delhi today. Mr. Mukherjee stated that much can be learned from tax systems of various nations and the multifaceted integration of societies has unified the development concerns of nations worldwide. He also emphasized the need for progressive tax policies that would not only address growing inequalities in incomes and wealth but will also provide resources to deal with structural issues in inequality and poverty.

Mr. Mukherjee informed the conference that India's tax reform policy aims at :Simplification of tax system and its administration, Rationalization of tax rates, Broadening of tax basis, Special focus on sunrise areas of taxation like transfer pricing and international taxation, Strengthening tax information exchange network with countries / jurisdiction , Improvement of tax administration ,better tax payer services and reduction in cost of compliance, robust dispute resolution mechanism and focused enforcement on high net worth individual, tax abuse practices and high revenue risk cases. He also said that India's progressive direct tax policy has resulted in tenfold increase in direct tax revenue from USD 8.61 billion in the fiscal year 1996-97 to US 87 billion in the year 2010-2011.

Addressing the conference, Mr. Min Zhu, deputy managing director of the IMF said that the IMF has been focusing on the issues of inequality and poverty for many years and has tried to give practical advice to different countries on the distributional effects of tax and spending policies and how to attain equity objectives. He said that though globalization promotes growth but the benefits are not equally distributed that leads to overall fiscal pressure. Giving the conference three challenges that they would need to address and seek solution to Mr. Zhu said that the first challenge to be addressed is that of fiscal consolidation that would be tough but need not be unfair and it could harm the poor but the social benefits could be reconfigured to protect the poor. The second challenge is to give equal attention to tax and spending sides and third is the dimensions of inequality that the fiscal policy can affect such as gender and ethnicity which can challenge the fiscal sustainability and social inclusion.

Speaking to the media persons Mr. R.S Gujral , finance secretary,said that the most basic issue that needs to be addressed is that can inequality be tackled through fiscal budgets and ensure that this issue is being given adequate attention. He said that the recent sharing of knowledge and information between countires can help them to adopt policies to solve the inequality crisis. Mr. Otaviano Canuto, Vice President of the World Bank, stated that taxes and inequalities lie at the core of the banking sector. He said that the limitations of the tax policies can be seen which require solutions and to reduce the dependency on foreign aid and finance the needs of the poor. The press meet was also attended by Mr. Jeffery Owens of the OECD, who said that there has been rampant offshore tax evasion that needs to be addressed. He stressed that it is necessary to look at the capital gains and the need to review the income tax systems, the policies of inheritance tax, gift tax etc. He said that the need of the hour is to have a tax administration that can play an effective role and smart tax policies that would promote growth and inequality.

When Mr. R.S Gujral was questioned on the effectiveness of the DTAA's and the TIEA's, he said that 22 agreements have been signed in the last two years and five of them have come into effect. He said that the international standards set by the OECD for transparency does not provide information of past transaction s except in the case of tax fraud, tax evasion and criminal cases.

When TIOL asked Mr. Jeffery Owens about the involment of the OECD in India with relation to tax and inequality, he said that though the involvement of the OECD with India is on a low scale but India has made great effort at the Cannes Summit by raising the topic of black money and stressing on the need for tax havens to sign TIEA's or DTAA's. .He also said that the idea of tax and development is not to get more aid but instead to mobilize domestic resources i.e taxes and it is essential that India implements the GST into its tax system as it would boost the economic growth of the country. Backing Mr. Owens statement, Mr. Gujral said that that India already has an expenditure budget that apart from paying attention to infrastructure and agricultural departments also focuses on the low income schemes like NREGA to address inequality issues.

The second day conference will see delegates and policy makers from all over the world discuss and seek solutions to end the inequality worldwide and implement better progressive tax policies and regularize the tax systems to avoid tax evasion.