Yet again we face the maze called budget that makes lots of verbal promises to help the poor, allocates very little real-allocation & yet leaves enough provision to inflation adjust the pay-n-perk of the bloated bureaucracy without any modicum of efficiency in its functioning.
Ordinary Indian Resident Individual tax payer needs a Double Taxation Treaty with India! It is often claimed by FM, CBDT that Indian income tax rate of 30% is way lower than the 40% that is the norm in places like Singapore & Canada. What they forget to compare, conveniently, is the fact that there the State takes care of children's education, old-age care & living accommodation allotment (the last as in Singapore, commensurate with family size).
The so called servicesprovided by our State is largely absent as allocations are eaten by fat bureaucracy in the course of delivery, doing paper work or awarding contracts to relatives of scoundrels, the large section of otherwise called MPs, MLAs, amply aided by bureaucrats who certify such contractors for a fee!. Only the unfortunate go to Govt schools & Govt hospitals as what reaches the teaching & medical staff by way of respectable pay packet & assets to do their job is peanut as bulk is looted on the way. Whereas it is not a curse to go to Public schools or Hospitals in the countries that charge 40% tax, as there is a degree of accountability ensured by Citizens rights & penalty for non-performance by bureaucrats.
FM routinely tinkers with taxable income starting point juggling around between rebate, exemptions; net effect after adjusting for inflation is that you no better than last year on real tax liability/take home! Granted we have moved farther away from the unrealistic 70% tax rates of 70s that promotes non-compliance.
But if one considers FMs much publicised fact that there are only 80000 tax payers, country wide, who declare income above 10lakhs, it is abundantly clear that the honest salaried class and pensioners & other low-income (<5-6 lakh per annum) subsidise the higher income earning people. It is no secret that if CBDT walks into a couple of Maker Towers in of our commercial capital Mumbai, they can rope in above 80000 salaried individuals earning more than 10lakhs, not to mention scores of mill-owners & other industrialists in the hinterland.
Enormous room for favorable interpretation of the Frankenstein Monster created by our Babus at CBDT called Indian Income Tax Act 1961 is an assured source of income for the by and large corrupt Assessment Officers. Average Individuals tax refund claims lie un addressed for decades!
The FM launched in a huge media blitz LTU-the Large Tax Unit of CBDT, to promote single-window & fast settlement of tax returns of large corporates. Indeed focussing on a small percent of tax payer that contribute a significant share of total tax revenue will add value to both Govt interms of faster revenue realisation & releasing locked up assets & provisions to the assessee, not knowing which way tax settlements will go!
On the other hand, if one looks at the productivity or the lack of it in CBDT, the department conducts annual melas in every Metro & class II cities and towns and collects Individual tax returns running into millions of transactions & employs thousands of small-babus to mind them for the oncoming decades that it takes to settle, if at all! Is it not a total waste of stationary, resources, besides harassment to individuals?
If only FM focussed on simplification of Individual tax laws, removed the room for interpretation, introduced deemed acceptance of refund claim, where there is no notice served within 2years after tax return is filed, the backlog will be cleared fast & compliance will improve, further placing accountability on the officials to do something timely with the papers they collect during the annual Melas.
There will be an incidental benefit, not insignificant though, that we would need fewer AOs, progressively, to scrutinise/serve notice/sit on replies etc etc reducing the cost of collection of tax-revenue.
I often wonder what percent of Individual tax rev realised is spent in the process of collection! I am convinced that it is much more than 10% & hence a national waste; whereas CBDT has clever heads under which it can bury real direct costs of collection,inside the smart Government Statistics.
Lastly, good Economics is bad Politics. It is anathema to talk of taxing agriculturists for any party, not just Left but the Right & Centre too! The reality is that the farmers that all Politicians vouch that they serve for, will be more than happy if ever he saw an annual income of Rs 5 Lakhs - that by the way is manifold higher than what 99% of them earn, literally on the ground.
Hence if the Govt introduced a modest 10% tax on Agri inc above 5Lakhs, they can catch the fat middle-men, money sharks holding so called agri assets & income therefrom un-taxed. The trouble is that that 1% is largely made up of the politicians themselves, to escape tax net as also the guys who fund their election expenditure. The policy not to tax Agriculture income goes to protect these swindlers who live off the real poor farmers.
A tax of 10% of Agri-income above 5L will open a new avenue; 10% of that collection can be set aside to offer subsidised crop insurance, thereby protecting the real guy & preventing farmer-suicides. BTW, for anything to be respected & responsibly used, there must be a cost paid however modest, by the user, even if it were 99% subsidised. So the farmer must participate & pay a modest Insurance premia.
So FM Sir, what is the spin due for 2006-2007 Financial years budget? What ingenious way are you going to come up with, to put yet another straw on the back of the camel - the poor Individual Assessee? Whatever it is, being a clever Harvard guy, you will come up with an obviously ridiculous one like withdrawal-tax to divert all steam & attention of not just the vast public but the so called inteligentia, skirting the attention from the fact that a vast number of intentions each requiring hundreds of thousands of crore are announced; alas, only 100 crore is sanctioned to each, for few Bureaucrats appointed under that head to eat by way of salary, phone bills, cars & fuels, through the year!
What is the Outcome of Outcome Budget? What is the fate of pause button you pressed on Fiscal (irr)Responsibility Budget (mis)Management (in)Act(ion), last year, delaying the much needed drastic-cut in Govts Revenue expenditure, bulk of which goes down the tube of non-working bureaucrats (ironically not required, if one were serious about get things done) salaries for them to paper around, without doing the real job!
Yet, it is an art to fool millions of poor, give goodies to the rich few who have access & whose noise is heard, so that everyone trumpets that here is another Dream Budget.
Indeed; we see the realisation of Plan objectives set-out, only in dreams!
Jai Hind!
PS: A sensible method of revenue collection, without 'leakage', called 'service tax' is used these days by Govt, often without providing any modicum of service in that area! You think you are paying high taxes? Wait till full brunt of Kelkar reforms to hit you soon enough - thou shall pay 16% on anything and everything under the Sun, besides Income Tax! Read the full story...
https://mouthshut.com/review/Ministry_Of_Finance-58330-1.html
