How are Laws Established in India?

Does US have better tax compliance with compared to India? If Yes, how do they ensure individuals and corporations comply with tax laws and don't fraud the system?

• Do a higher percentage of people comply with tax laws in US compared to India. How do they manage that? I have seen even at petrol pumps and convenience stores they give a proper bill and accept cards which makes the income registered whereas in India small and medium business regularly evade taxes by not . What makes the small medium businesses comply with tax laws in USA which is missing in India. This question is intended to find out why India has such a low tax compliance and how to curb tax evasion.

• Answer:

  US has the world's highest highest tax compliance rate. Reasons: People are honest. It's cultural. Tax rates are relatively low. The bottom half pays no income tax. Less reliance on consumption taxes such as VAT, gasoline, alcohol. Legislators write tax laws designed to be enforceable. Small shadow economy (black market). Very low corruption (bribes). US IRS conducts research audits to identify noncompliance, selects topics with highest payoff, changes rules or takes action to increase compliance. Steps India could take: Stronger economy, so people spend time achieving rather than cheating. Make taxes more progressive. Reduce consumption taxes, which are regressive. Teach legislators process simplification. Eliminate 90% of bureaucrats. Illegalize bribes.