Dr.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

TAXATION

PROJECT SYNOPSIS- Tax Avoidance and its

Impact on Developing Countries' Revenue and
Economic Growth

SUBMITTED TO – SUBMITTED BY –
DR. BHANU PRATAP SINGH VANSHITA GUPTA
ASSOCIATE PROFESSOR Enrollment No.- 200101153
(TAXATION) B.A. LL.B. (Hons.)
Dr. Ram Manohar Lohiya National Law University 7th Semester, Section ‘B’
 INTRODUCTION
Tax avoidance means reducing our tax liability without breaking any law. In this an
individual looks for loopholes in the law and makes most of those loopholes to reduce the tax
liability. Tax avoidance is a legal means of reducing our tax liability by exploiting gaps or
taking advantage of loopholes in the law, resulting in us paying less tax. By utilizing Tax
Avoidance, we are able to comply with all legal requirements while also lowering our tax
liability. We are not penalized or fined for tax avoidance because we are not breaking any
laws. We are simply taking advantage of legal loopholes in order to decrease our tax burden.
This activity has an impact on revenue generation in developing countries, as it prevents the
tax's intended goals from being met. Despite the governments’ efforts to combat the problem
of tax evasion and avoidance, the economy's growth continues to slow. Reduced capital
expenditures, recurring expenditures, economic development, monopolistic problems, and
national debt are also on the table.

OBJECTIVES
a) Overviewing and understanding the terms tax avoidance.
b) Putting forward reasons or causes of Tax Avoidance and different ways in which it
happens.
c) To understand and find out consequences and impact of tax avoidance on the revenue and
economic growth of developing countries.
d) Discussing the role of government policies in overcoming the problems created by Tax
Avoidance.
e) Understanding loopholes in tax system our country, India.

METHODOLOGY
The present study will be mainly analytical and theoretical. the data are collected from the
secondary resources like journals, articles, media reports, Books and different websites to
analyze the research question and test the hypothesis and also secondary sources will be used
as a reference to analyze and understand the criticism behind the study of this research paper.
 SCOPE
This research is confined to the understanding of Avoidance and put forwards the further
impact caused by such activities on the revenue and economic growth of developing
countries like India. Further study also discusses and analyzes the loopholes in present
taxation system (especially in India) and role of government policies in overcoming problems
and consequences of Tax Avoidance.

SIGNIFICANCE
The study is significant in understanding the various lacunae in the taxation laws and systems
of developing countries. It also serves as mirror to review the consequences of these lacunae
that promote the menace of tax avoidance.

CONCLUSION
There are different ways by which a taxpayer can escape his tax liability. But there is a thin
line difference between escaping tax liability and overcoming tax burden. Everything can be
done by both legal means and illegal means; consequently, the outcome would also be
accordingly legal and illegal ways – this is understandable. In most developing countries,
most of the persons do not pay their taxes. They try to avoid this by some illegal means or by
taking the benefit of some loopholes in the Indian tax system. Tax avoidance strategies used
by these large corporations indeed help them save billions of dollars each year, however tax
avoidance causes great deal of loss to the government and creates an unfair market, as a
person working for a salary or a small business, has very little knowledge or intellect for
building up strategies in order to avoid taxes and end up paying taxes in full. Whereas big
business houses continue to lower their burden on tax through tax avoidance. It is difficult to
prove that these corporate giants did actually evade tax as they somehow do it in within the
four walls of law. In reality, the business model of these big business houses is actually based
on how effectively they can avoid tax and make huge profits for their investors. The idea
behind tax avoidance still remains that, apart from the transaction/deal, the company must
make a good amount of profit and not lose huge percentage of the profit in taxes. There are
huge loopholes in taxation systems of developing countries that indirectly promote this
problem. Solution is for the designated authorities to take several measures for avoiding the
Tax avoidance practice in terms of making amendments in their taxation laws in several
forms.
 REFERENCES
• Auriol, Emmanuelle and Michel Warlters (2005), Taxation base in developing
countries, Journal of Public Economics 89, 625-646.
• Bahl, Roy and Richard M. Bird, 2008, Tax Policy in Developing Countries: Looking
Back and Forward, National Tax Journal 61, pp. 279-301.
• Cobham, Alex (2005), Tax evasion, tax avoidance, and development finance, Queen
Elisabeth House Working Paper No. 129.
• Desai, Mihir, Fritz Foley and Jim Hines (2006a), Do Tax Havens Divert Economic
Activity? Economics Letters 90(2), pp. 219-224.