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Why spare our rich farmers?
Swapan Dasgupta
Finance Ministers P Chidambaram's not-so-short Budget speech on February 28 was educative on two counts. There was, of course, the expected recitation of a verse from the legendary Thiruvalluvar. This year, however, this literary flourish was overshadowed by a remarkable revelation: that there are only 42,800 individuals with a taxable annual income of Rs 1 crore and above.
My initial reaction was that the FM had somehow missed out a zero. But it is now confirmed that all the Indian 'super rich' taken together won't succeed in saving their preferred candidate's security deposit in a parliamentary election. Nor is the wall separating the middle class and the rich excessively permissive. From all accounts, the Indian definition broadly corresponds to international standards.
Predictably, the 42,800 figure has been greeted with incredulity. Pure anecdotal evidence would suggest that there must be at least that many crorepatis living in both Delhi and Mumbai. Judging by the lavishness of 'society' weddings, the quality of food and liquor served in parties and the astronomical sums involved in property transactions, there is nothing to suggest that the numbers of the very moneyed equal the number of Indians who are habitual book buyers. And I am not including the internet billionaires in Bengaluru and Chennai, the flashy crowd of Hyderabad and Vijaywada, and the BMW and Mercedesbuying pappis in Ludhiana and Jalandar. Nor am I including my astonishment that magazines such as Robb Report and one devoted exclusively to luxury yachts actually warrant separate Indian editions. There is, as the satirical magazine Private Eye used to say, "shurely shome mishtake".
Don't get me wrong. This is not a plea to finance ministers to squeeze the rich till the pips squeak. In the bad old days of socialism, Indira Gandhi had raised the highest slab of taxation to an astonishing 98 per cent, a move that proved woefully self-defeating. In France, President Francois Hollande's election promise to introduce a 75 per cent tax slab for the very rich has seen an exodus of the well-heeled French to Belgium and Britain.
Experience shows that punitive taxation act as a disincentive to entrepreneurship and, more often than not, leads to rampant tax evasion. Neither the middle class nor the rich mind paying their dues to the state on three conditions. First, they must be reassured that there is sufficient post-tax money in their pockets to spend on either their families or their fancies. Secondly, the government must provide sufficient evidence to demonstrate that state expenditure is meaningful, productive and beneficial to citizens. Wasteful expenditure and widespread corruption from state funds invariably breeds resentment. Finally, governments have to refrain from imposing taxes that are aimed at making life hellish for the pet hates of special interest groups. In a recent editorial, The Spectator (London) berated the new European tendency to use taxation as a "cure all". The new proposals for "fiscal therapy" have included an anti-obesity tax on sugary drinks, a mansion tax on high-end housing and (in Sweden) a meat levy to cope with cows that emit too much methane gas.
India's personal tax rates, as they stand, are reasonable. But the government wants more and more because it wants to convert state-sponsored welfare into an entitlement. Since this spendthrift approach corresponds with the relatively small numbers in the income tax net, there is unending pressure to squeeze honest taxpayers as much as possible. This means that the middle classes have less money to spend on themselves, their children and on improving their quality of life.
At a time when Corporate India is fighting a rearguard battle to remain competitive, it is self-defeating to tax business further and curtail the growth of new jobs and opportunities.
So, short of increasing the fiscal deficit, inviting a ratings downgrade and making the Indian rupee worthless, is there a way to enlarge the tax net? The answer is staring policy-makers in the face but they are petrified of even broaching the subject.
A tax on high agricultural income is an idea that cannot be resisted much longer. The point is to consider imaginative ways to sell the idea politically and for a leadership bold enough to carry it forward.
Why spare our rich farmers? by Right & Wrong : Swapan Dasgupta's blog-The Times Of India
********************************
For whom does the bell toll?
Should the rich farmers be taxed?
How much difference would it make?
If indeed they really require to taxed for the good of the nation, is there anyone who can upset the present apple cart where they have taken it for granted that it is their entitlement not to be taxed?
Swapan Dasgupta
Finance Ministers P Chidambaram's not-so-short Budget speech on February 28 was educative on two counts. There was, of course, the expected recitation of a verse from the legendary Thiruvalluvar. This year, however, this literary flourish was overshadowed by a remarkable revelation: that there are only 42,800 individuals with a taxable annual income of Rs 1 crore and above.
My initial reaction was that the FM had somehow missed out a zero. But it is now confirmed that all the Indian 'super rich' taken together won't succeed in saving their preferred candidate's security deposit in a parliamentary election. Nor is the wall separating the middle class and the rich excessively permissive. From all accounts, the Indian definition broadly corresponds to international standards.
Predictably, the 42,800 figure has been greeted with incredulity. Pure anecdotal evidence would suggest that there must be at least that many crorepatis living in both Delhi and Mumbai. Judging by the lavishness of 'society' weddings, the quality of food and liquor served in parties and the astronomical sums involved in property transactions, there is nothing to suggest that the numbers of the very moneyed equal the number of Indians who are habitual book buyers. And I am not including the internet billionaires in Bengaluru and Chennai, the flashy crowd of Hyderabad and Vijaywada, and the BMW and Mercedesbuying pappis in Ludhiana and Jalandar. Nor am I including my astonishment that magazines such as Robb Report and one devoted exclusively to luxury yachts actually warrant separate Indian editions. There is, as the satirical magazine Private Eye used to say, "shurely shome mishtake".
Don't get me wrong. This is not a plea to finance ministers to squeeze the rich till the pips squeak. In the bad old days of socialism, Indira Gandhi had raised the highest slab of taxation to an astonishing 98 per cent, a move that proved woefully self-defeating. In France, President Francois Hollande's election promise to introduce a 75 per cent tax slab for the very rich has seen an exodus of the well-heeled French to Belgium and Britain.
Experience shows that punitive taxation act as a disincentive to entrepreneurship and, more often than not, leads to rampant tax evasion. Neither the middle class nor the rich mind paying their dues to the state on three conditions. First, they must be reassured that there is sufficient post-tax money in their pockets to spend on either their families or their fancies. Secondly, the government must provide sufficient evidence to demonstrate that state expenditure is meaningful, productive and beneficial to citizens. Wasteful expenditure and widespread corruption from state funds invariably breeds resentment. Finally, governments have to refrain from imposing taxes that are aimed at making life hellish for the pet hates of special interest groups. In a recent editorial, The Spectator (London) berated the new European tendency to use taxation as a "cure all". The new proposals for "fiscal therapy" have included an anti-obesity tax on sugary drinks, a mansion tax on high-end housing and (in Sweden) a meat levy to cope with cows that emit too much methane gas.
India's personal tax rates, as they stand, are reasonable. But the government wants more and more because it wants to convert state-sponsored welfare into an entitlement. Since this spendthrift approach corresponds with the relatively small numbers in the income tax net, there is unending pressure to squeeze honest taxpayers as much as possible. This means that the middle classes have less money to spend on themselves, their children and on improving their quality of life.
At a time when Corporate India is fighting a rearguard battle to remain competitive, it is self-defeating to tax business further and curtail the growth of new jobs and opportunities.
So, short of increasing the fiscal deficit, inviting a ratings downgrade and making the Indian rupee worthless, is there a way to enlarge the tax net? The answer is staring policy-makers in the face but they are petrified of even broaching the subject.
A tax on high agricultural income is an idea that cannot be resisted much longer. The point is to consider imaginative ways to sell the idea politically and for a leadership bold enough to carry it forward.
Why spare our rich farmers? by Right & Wrong : Swapan Dasgupta's blog-The Times Of India
********************************
For whom does the bell toll?
Should the rich farmers be taxed?
How much difference would it make?
If indeed they really require to taxed for the good of the nation, is there anyone who can upset the present apple cart where they have taken it for granted that it is their entitlement not to be taxed?
