It has become a routine that tax proposals in every budget bring about their share of strikes. During last year it was service tax on medicos and lawyers which invited strikes. This year it has been proposal to tax Bidis and unbranded gold jewellery which has incurred the wrath. But what has been alarming about this Year’s proposals is the fact that decision to withdraw has been taken only after an estimated and colossal loss of GDP of Rs. 20,000 crores was incurred, even without a single paisa going to Exchequer by way of tax. In and around Solapur, more than 65,000 women did not get paid a single paisa because their employers were on strike. Therefore, the Beedi manufacturers’ strike hurt workers disproportionately. The Government will earn less than 100 crores from this Beedi tax, out of a total budget of 1.4 lakh crores, but incurred loss of GDP and may have to spend more on the anti-poverty programmes of these base level workers. This clearly points to a disconnect between those who take such tax policy decisions and those who are going to be affected by such proposals. While we in India have been historically (not sure whether validly) following a policy of no transparency about budget tax proposals since pre- independence times. Even political class should be aware of the consequences some tax proposals have had in the history. To briefly recount, French revolution and India`s independence due to contributory factor of tax proposal of putting tax on salt and “scutage” by King Henry which allowed knights to opt out of their duties to fight in wars by paying the tax, which many believe led to creation of the Magna Carta, which limited the king’s power. Even if we want to continue with the policy of no transparency in tax proposals, the FINMIN will do itself a great service it uses the services of organizations like Central Economic Intelligence Bureau to judge the pulse of the people about some of the proposals with far-reaching consequences in so far they seek to disturb the long followed policies of the Government.
Cost of compliance reduction on agenda of policy framers:
It is really heartening to note that constant efforts by tax reformists have eventually put reduction of cost of compliance on the agenda of the tax policy framers. In this context, the Study Group set up under the Chairmanship of M.K. Gupta (Retd. Vice Chairman, Settlement Commission) for making a draft for common code for Excise and Service Tax has, interalia, been given following term -
i. To suggest any other measure that will help in reducing the cost of compliance for business, or transition towards a comprehensives GST.
It has always been emphasized by us that the only real tax reform that Government can give to the citizens of India (knowing well that each Government needs more and more revenue for itself) is reduction in cost of compliance which includes costs of unnecessary procedures, hidden costs, costs of unnecessary reporting to multiple tax agencies including returns, cost of litigation and heavy costs of maintaining accounts by employing accountants especially by small tax payers. No small tax payer will grudge paying little more on any prudent notional basis, if he is not asked to make elaborate accounting systems of CENVAT and if it saves him time and cost of looking into more and more accounts. We hope that committee will come out with a tax code which will be path breaking and simple for everyone to understand and simplify life for tax payers, rather than churning out some imported from abroad intellectual showpiece of a legislation which not even tax collectors can understand.
Tax savings :
A universal urge: What Vodafone is doing to save its taxes and what the Government is doing to retain already recovered taxes and to get more is nothing new. The difference between tax evasion and tax saving was spelt out earlier by the Apex court in the famous Mc Dowell’s case. Following instances will show what the taxpaying public has been historically doing to avoid the tax through little ingenuity.
-In 1696, England implemented a window tax, taxing houses based on the number of windows they had. That led to many houses having very few windows in order to avoid paying the tax. Eventually this became a health problem and ultimately led to the tax’s repeal in 1851.
-In the 1700’s, England placed a tax on bricks. Builders soon realized that they could use bigger bricks (and thus fewer bricks) to pay less tax. Soon after, the government caught on and placed a larger tax on bigger bricks. Brick taxes were finally repealed in 1850.
-In 1705, Russian Emperor Peter the Great placed a tax on beards, hoping to force men to adopt the clean-shaven look that was common in Western Europe.
-In 1660, England placed a tax on fireplaces. The tax led to people covering their fireplaces with bricks to conceal them and avoid paying the tax. It was repealed in 1689.
-Playing cards were taxed as early as the 16th century, but in 1710, the English government dramatically raised taxes on playing cards and dice. This led to widespread forgeries of playing cards to avoid paying taxes. The tax was not removed until 1960.
-In 1712, England imposed a tax on printed wallpaper. Builders avoided the tax by hanging plain wallpaper and then painting patterns on the walls.
-England introduced a tax on hats in 1784. To avoid the tax, hat-makers stopped calling their creations "hats", leading to a tax on any headgear by 1804. The tax was repealed in 1811
-Japan imposed a tax on whiskey which is based on the percentage of alcohol by volume, so Japanese whiskey manufacturers began diluting their product with water to avoid the tax.
- In our own India, the tax on radios and televisions levied till 1970s was sought to be avoided by public by concealing antennas. Same, however was abolished during emergency period.
Cannot attend to call of nature, attend phone call:
In a country known for so many women in powerful positions, you’d think that access to proper sanitation and bathroom facilities would be a priority. India with about 1/7th of the world’s population, numbering around 1.2 billion. Nearly half of those — 563.73 million have mobile phone subscriptions. This does not count the landline subscriptions in any case. As per a United Nations Study, approximately $358 billion is needed by 2015 to cut in half the proportion of individuals who don’t have access to proper sanitation.
The study has revealed that it would cost about $300 to build a toilet, though this includes both labor and materials. This would in turn be economically feasible for the rest of the world, who could see a return of up to $34 for every dollar spent on the sanitation efforts. This would come about through reduced poverty, health care costs, and increased productivity. But with our misplaced priorities, it is obviously the mobile phone penetration that gets the edge. The rate at which mobile sets are being sold in India, in ten years time we will have to address the issue of junked phones and its waste disposal in a big way.
This may again pose a problem of health and sanitation. So, all the wise ones start discarding your old mobile phones right now, lest Government Comes out with some kind of Green tax later. Disposal of junked Computers and Cars is also likely to invite tax in future with more of our Mother India`s territory being occupied by these.