📋 Written Ability Test (WAT)/Essay Analysis Guide

🌟 Understanding the Topic’s Importance

Taxation reform is pivotal in addressing economic inequality, a critical issue influencing social stability and economic growth. For B-school students, comprehending this relationship is vital for roles in policy-making, finance, and corporate strategy.

📝 Effective Planning and Writing

• ⏳ Time Allocation:
  • Planning: 5 minutes
  • Writing: 20 minutes
  • Review: 5 minutes
• 📏 Word Count Distribution:
  • Introduction: 60-70 words
  • Body: 350-375 words
  • Conclusion: 60-70 words

💡 Introduction Techniques

1. Contrast Approach: “Despite global wealth reaching unprecedented levels, economic inequality persists, prompting debates on the efficacy of taxation reform as a solution.”
2. Solution-Based Approach: “Taxation reform is heralded as a critical tool for reducing economic inequality, with progressive taxes, wealth taxes, and improved tax compliance offering pathways to a more equitable society.”
3. Global Benchmarking: “While countries like Norway and Sweden demonstrate the potential of taxation to curb inequality, others struggle to achieve similar outcomes due to administrative and systemic barriers.”

📊 Structuring the Essay Body

🏆 Achievements of Taxation Reforms

• 🔄 Redistribution of Wealth: Progressive taxation systems in countries like Sweden have significantly narrowed income inequality, with the Gini coefficient consistently low (0.27 in 2023).
• 🏥 Funding Public Services: Tax revenues in Scandinavian countries support universal healthcare and education, ensuring social mobility and reducing poverty.
• 📈 Enhanced Compliance: Technology-driven reforms like India’s GST have streamlined indirect taxation, improving compliance and revenue collection by over 18% since its implementation in 2017.
• 🌍 Global Cooperation: The OECD’s Global Minimum Tax agreement prevents multinational corporations from exploiting tax havens, promoting fairer wealth distribution.

⚠️ Challenges in Implementing Taxation Reforms

• 💸 Tax Avoidance: High-net-worth individuals and corporations exploit loopholes, reducing the effectiveness of taxation policies. Over $600 billion is lost annually to tax avoidance globally (IMF, 2023).
• ⚔️ Political Resistance: Wealth taxes in countries like the United States have faced significant opposition, with critics arguing they discourage entrepreneurship and investment.
• 📉 Administrative Barriers: Developing countries often lack the resources and systems to efficiently collect taxes and address evasion, leading to revenue shortfalls.
• 🌐 Global Disparities: Countries with weaker institutions struggle to enforce tax laws, further exacerbating inequality.

📈 Future Outlook and Recommendations

• 🖥️ Digital Infrastructure: Leveraging technology for tax collection can enhance compliance, as demonstrated by India’s GST and Estonia’s digital tax systems.
• 🌍 Global Standards: Strengthening international agreements like the OECD’s BEPS framework can address cross-border tax evasion.
• ⚖️ Progressive Reforms: Introducing targeted wealth taxes with exemptions for productive investments can ensure equity without deterring economic growth.
• 🏗️ Investment in Social Services: Utilizing tax revenues to fund education, healthcare, and infrastructure will address root causes of inequality, creating a virtuous cycle of growth and equity.

📄 Concluding Effectively

Balanced Conclusion: “Taxation reform holds immense potential to reduce economic inequality, provided it is implemented thoughtfully with measures to prevent evasion and address systemic barriers. By balancing progressive taxation with investments in public goods, nations can achieve both equity and sustainable growth.”

Global Perspective Conclusion: “While countries like Sweden and Norway exemplify the success of taxation in reducing inequality, global efforts are required to address challenges such as tax evasion and enforcement gaps. A concerted approach integrating global standards and local innovations can create a more equitable world.”