By Shivaji Sarkar
India’s is a fledgling economy. It needs to be tended with care. It is like a yogi. As long as it practices yoga, it balances its health between good and not so good. A little un-tending can throw it off track.
It is still a developing economy trying to be bracketed with the highly developed ones. India wants to have G8 expanded to G10 to include the two largest but jerky economies, itself and China. That may change global perception but realities may not be different.
Revenue Secretary Hansmukh Adhia has rightly diagnosed it. The GST is uncomfortable for the small and medium sector. He wants it to be revisited for their comfort and indicates that recent price rises of many commodities, including textile, garment, vegetables and other items have a link to the GST.
What Adhia says is true of all its taxes. India has to have a relook beyond the GST. Remember, 2014 was a landmark. It came with many hopes. Taxes would be rationalised – come down; prices would be affordable, banks would behave better and reduce charges, jobs would grow and the nation would feel the real prosperity.
Many happened. Most somehow are yet to happen. The hope is still there with a ‘dynamic’ Prime Minister Narendra Modi, despite the Opposition brouhaha. He has the reputation of doing the undone. A beginning has to be made. The GST has one good aspect. Except its implementation, nobody is rigid about its framework. It is changing and possibly with Adhia’s comments, it is in for more changes.
This good part has to extend to other aspects of the economy as well. Many realise it, many try to ignore it. This is the most taxed country with irrational rules. Its obsession with black money, which as the note-ban figures denoted is not more than one percent of the total currency notes circulated at approximately Rs 16,000 crore that did not come back to the RBI coffers.
It is also true as per an Oxfam study that a mere one percent people have grabbed 58 per cent of the wealth here. So it is no more a guess who may be having the black money. The rest 99 per cent shares a mere 42 per cent of the wealth.
Let this country rethink about what is black. In reality, it has grown in proportion to the free public sector bank lending post 2008 US-Euro sub-prime crisis. India was untouched by it but the irrational lending has led the country to a trap of Rs 12 lakh crore unpaid debt – people’s money that was swindled away by large corporate as per the Economic Survey 2016.
Trade, business and the common earners have long been cherishing an easier income-tax and bank operations. This hope is still there. All want an affordable tax and charges. All these classes are in an exploitative multi-tax regime. Personal income-tax (PIT) robs them of almost five months of their earnings.
Bank charges, demand for identity, TDS on deposits, tolls on highways, various rising local body taxes and charges, medical expenses, fuel and transport costs including spiralling train, bus, metro and taxi fares, electricity and water rates, parking charges, property stamp duties and many others are robbing the people of whatever they earn.
If the State or its wings usurp whatever they earn, they are left with little to spend. In terms of economy it is called lack of disposable income – key to the progress. The State has to make a beginning with the (PIT), the most irrational of all and then move on to the tolls, said to be the highest in the world.
The Income Tax revenue loss would be about Rs 3 lakh crore plus. The direct savings in tax administration would be over Rs 1 lakh crore, inspections another at least Rs 50 lakh crore – the net notional revenue loss approximately Rs 1.5 lakh crore. The net gain to the economy is Rs 3 lakh plus crore – including the compliance costs. It would be an important lubricant.
Taxpayers would have a greater relief that they would also be freed of tax terror and can spend their money with confidence without a prying eye. Is there a rational that if a person sells any belonging he is made to deduct a TDS of one per cent of the buyer’s payment, deposit it in his IT account, which the seller claims next financial year and paid possibly a year later?
Is there any rationale for such utopian procedure? Does it really save black money generation? No. It only complicates procedures, blocks money circulation and slows the economy down. The flip side is many avoid transactions altogether. That is the net loss to the State and compounded loss to the economy.
Euphoria alone does not create a thriving economy. It would be if there is flow of money. Choking it and channelising it through banks add to the costs, causes inflation, drives away buyers, the policymakers do a merry-go-round and nothing thrives. In economy, wishes can never be horses.
A cash of Rs 100 even after a lakh of transactions remain Rs 100. If it is moved through banks or digital system with charges of 1 to 2.5 per cent each time it would be adding to almost Rs 2 lakh of charges to be gobbled up by the one per cent rich. The poor and middle class would lose and they would not be able to go to the market. UNCTAD has rightly given a call against such financialisation. Let us rethink.
This has to extend to all other charges. The State is a creation of the citizens. It has to work in their interest and not for the profit of the few. Most levies can be reduced. Ultimately, being the largest entity it helps the State as its expenses — fiscal deficit — would come down.
The State cannot be a guzzler of people’s money and pauperise them. The G-20 prescription of tough tax regime and control of finances is flawed. Mere deficit control would not be a solution.
The country does not need incentives but rational taxes and levies. It needs a wider discussion to change the nation’s financial system. Trust the people, lower taxes and levies, make transactions simpler, the economy would thrive. The bonus, nobody would try to save taxes and generate what is called the black.—INFA