The tax rate in India—at 30 per cent—is among the lowest in the world (What Is Thy True Worth?, Mar 5). Given the dismal state of education and healthcare, the government does need more money. But taxing the rich would be a wrong priority. The problem is the small tax base.
R.J. Chandra, Phoenix, US
The real question is not the corpus the government collects but how the money is utilised. If the leakages are stopped and the country is rid of corruption, there will be money in abundance for development. Until systemic changes are in place, it is pointless to try and collect more taxes as they will only disappear into the deep chasm of corruption.
Col Surender Singh, Jaipur
Warren Buffet, that epitomic capitalist, floated this ‘tax the rich’ kite on behalf of Barack Obama. The maximum tax rate in India is 30 per cent. That’s not low. Raising it would disincentivise enterprise and incentivise avoidance.
Manish Banerjee, Calcutta
Equity demands the superrich pay more, but experience shows it encourages nothing but tax evasion.
Narendra M. Apte, Pune
Equity demands that the super rich should pay more. But experience tells us that nothing much is achieved by higher rates of tax except proving the urge in the rich to evade tax. There is not much evidence to show that reduced rates (or for that matter higher rates) of individual income tax have reduced generation of black money or closed avenues of tax evasion on the part of non-salaried tax payers. Therefore, for sake of equity and to increase tax compliance and thereby revenue, and to curb generation of black money, a few measures need to be taken on priority basis. These are: revamping the tax administration, implementation of administrative reforms and ensuring better coordination between the Excise, Income Tax and the States’ Commercial tax departments. Concerned citizens also express the hope that Union and State governments agree to introduce GST without any further delay as that is a very relevant legislation in the current scenario. Lastly effective and better utilization of tax revenue for the welfare of poor by all the Governments is a pre-requisite of ensuring equity.
At 30% the tax rate in India is among lowest in the world. The overall tax rate is even lower considering there is no local and state taxes. Given dysmal state of education and healthcare there is no doubt that government needs more money. Governance and waste is permanent issue all over the world. But that is separate issue.
Targeting rich to raise money would be wrong priority. Problem is low tax base. It is unfair when self employed, professionals and big farmers don't pay any tax.
I agree with Anu Aga. The more burning issue is what is done with the tax payers money today? Otherwise, it will be just be more money flushed down the toilet. There is just no debate at all on Government waste, in fact more government is always viewed as the solution. Hence, propounding simplistic solution of tax those stinking rich (punish them for being rich) keeps gaining currency.
I can tell you as a honest tax payer, everyday I feel cheated. Hence, I blame the government more that those that cheat on their taxes. The 1Km road to my home has always been a "moon surface" - other than gravity reminding me I live on earth I always feel like I am on the moon. Everytime someone (neighbor, family) cribs about it - I ask don't you remember we are 3rd world - why should we expect any better. They don't like my saying so as it hurts their newly found confidence, sense of place in the world and "wet" dreams of superpower status. And then in my mind I sing, someone asking me "Don't you have no sense of purpose oh you bloody 3rd world man" and I answer "No I don't have no sense of purpose, I am just a bloody 3rd world man".
Every time I see a car with a "red light", my blood boils. I have a viseral dislike for these leeches like parasites sucking away my taxes and lording over me when actually I pay their salary and hence my time ought to be more valuable than theirs.
If the media is so bothered about inequal taxation, why does it ignore the disparity between males and females, ensured by the government?
Even train tickets for the elderly, are biased against males!
No wonder, even Barons like Vijay Mallya ( picture ) prefer the company of sexy women and young boys, to ugly looking males.
One has to agree with Col Surender Singh. There is no incentive for anyone to pay taxes in India, as it is difficult, if not impossible, to see tax money working for the benefit of the taxpayers. The rich and well connected will do everything possible to ensure that taxes are not raised, as they don't want to pay any more money to a largely dysfunctional administration. The middle class and poor have no choice, bereft as most of them are of any connections or spare cash with which to grease palms. By and large, people will not mind paying for a good cause, which really is the reason why nobody wants to give the Government of India anything.
The real question is not the corpus that the govt collects, but how is the tax payers money utilised? If the leakages are stopped and country rid of corruption, than there will be abundant money available for development.
Until systemic changes are in place, it is pointless trying to collect more taxes as they would only disappear into the deep chasm of corruption. Just a relook at the cost of governance, cutting down the wastefull expenditures and making frugal living a national trait would save billions for development.
Raising tax rates with the current form of bad governance would only burden the poor (indirect taxes) and the middle class (direct & indirect taxes ) where as corporates and the supert rich would continue to enjoy tax benifits? Hence sysyemic changes must come before any talk of raising taxes!
Reduce taxation rates on the one hand and hike penalties for tax evaders. Only a twin pronged approach will solve the problem of revenue generation. The super rich find it cheaper to bribe politicians/bureaucrats than to pay taxes. If the taxation rate is low, say 10 %, then they would prefer to pay taxes instead of trying to evade them.
Based on the assumption that there are 2 crore rich people in India, and the average tax earned per assessee is 2.5 lakhs, then the Government will be able to raise about Rs, 5 lakh crore. Then the Government can spend more on poverty alleviation schemes and on improving the infrastructure.
However, the Government has a vested interest in ensuring that tax evasion continues as there is a lot of money to be made by turning a blind eye to evasion. The easy way out is to tax the poor of the country through indirect taxes, in which the bulk of the burden is placed on the poor man's back.
Warren Buffet, the ultimate capitalist, is the one who floated this 'tax the rich' kite on behalf of Barak Obama. Buffet has been clever. Highest tax rate in his own country is around 50%. He knows there is no way there can be any increase in this rate & even if this rate is enhanced quantum per force has to be token & therefore would not make any difference. The same holds for India too. Maximum tax rate in this country is 30%. That is not low. Raising it would disincentivice enterprises & incentivise avoidance. One of the rare positive outcome liberisation is lowering of tax rates & increase in collection.
So issue is not tax rate but the system which leaves miryads of sinews through which taxes are legitimately avoided & myriads exemptions for those who can lobby for it in appropriate quarters. The so called avoidance of double taxation treaties are not what they are touted to be. Double taxation treaties are in effect well planned & engineered legal tax avoidance devices.
The securities transaction tax takes care of the long term capital gains on securities bit. Dividends should not, in fact, be taxed because they are paid out of profits that have been taxed in the hands of the company declaring them. Wealth tax is a bad idea, estate duty even more terribly so, both destructive of the accumulation of accountable wealth that is put, in the main, to productive use in the corporate sector.
There is a need to strike a sensible, non ideological balance between equity and growth. No one wishes to return to the era of PL 480 and marginal tax rates of 97%.
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