Swarajya, March 25, 1961
Indirect taxation, whether it be an excise or customs duty, or a raising of transport charges through any one of several methods, tends to a rise in prices all round. This results in increased cost of living and of all industrial production, small scale or large scale.
If a ‘superior’ quality of any popularly demanded commodity is made costlier than hitherto by the levy of an additional tax, a part of the consumption naturally shifts to one of a lower quality, and the latter follows the law of supply and demand, and immediately (and in anticipation) also goes up in price. The pattern of consumption is a closely integrated and complex thing.
The farmer’s life will be hit badly as a result, direct and indirect, of the new levies. He stands at the bottom to bear the total brunt of all the rise in prices. The country cannot prosper or be happy with the peasants, the weavers and other artisans repressed and consigned to suffer all the weight of administrative mis-management. It would be foolish for the business community to be happy over their escape from any new direct levies. They will have to prepare for difficult days as a result of these indirect taxes.
Indirect taxation, whether it be an excise or customs duty, or a raising of transport charges through any one of several methods, tends to a rise in prices all round. This results in increased cost of living and of all industrial production, small scale or large scale. Ignorance or, worse still, limited knowledge on the part of those in authority is disastrous. Power carries with it responsibility but this is difficult to be borne satisfactorily when supported ‘by a little knowledge’ which is dangerous.
If a ‘superior’ quality of any popularly demanded commodity is made costlier than hitherto by the levy of an additional tax, a part of the consumption naturally shifts to one of a lower quality, and the latter follows the law of supply and demand, and immediately (and in anticipation) also goes up in price. The pattern of consumption is a closely integrated and complex thing. Any interference at one point alters the figure all over. One, therefore, with knowledge of the economy of trade and consumption must expect a rise of prices all round when new levies are put on fifty odd items, in order to raise Rs.60 crores of additional revenue. Commercial circles believe that this is an under-estimate of the likely receipts.
Probably an example from a tangible aspect of urban life may make it easier for the Finance Minister and other members of Parliament to appreciate the point. If an additional tax be levied on terraced and two-storey houses, it will raise the rents not only of such houses, but will push tip the rents for tiled and one-storey houses also. It will not be an unreasonable consequence of the new levy or something to be surprised of or angry about.
Any minister with well-equipped advisers to help him to appreciate and anticipate trends and consequences of new imposts should not be surprised at what has happened after the budget announcements. But our Finance Minister is surprised and angry, and talks of preventive detention! The authors of repressive laws, framed to meet emergencies, did not conceive such laws as available for regulating and checking prices of commodities and services that rise in natural response to budget proposals. A police mentality cannot understand the complicated workings of trade and business in a non-communist country. Long before the budget announcements were made on the floor of the house, indirect taxes on commodities and services had been anticipated as a result of the so-called ‘Plan’, and a rise in prices was forecast which would worsen the life of the poorer sections. One who sets fire to the verandah roof cannot object to or be angry with the fire when it spreads to the whole building. Let the Finance Minister understand that what he has done will result in many more surprises yet. All costs, including the cost of the administration and the costs of industrial and agricultural production, including the wage bill, all over the country, will go up, perhaps not so immediately as the shooting up of market prices, but all the same surely and steadily. Neither economic laws nor an entire community can be put under preventive detention, however ‘firm’ (that is, presumptuous) and ignorant the administration may be!
Some ‘concessions’ have been made. These have been commented on by the press. Members of Parliament as well as the Finance Minister may easily see that these so-called concessions make no material change in the situation.
It is unfortunate that the permanent civil service has got into the habit of adjusting its advice to ministerial errors and perversities and, instead of being a check and a safeguard against the dominance of politics over administrative prudence, augments and accentuates error.
The two greatest afflictions the people suffer from today are high prices and an administration that at all levels sacrifices fair play and justice on the altar of the ruling party’s politics. Coercion cannot set right what has followed the budget announcement of new taxes.
The farmer’s life will be hit badly as a result, direct and indirect, of the new levies. He stands at the bottom to bear the total brunt of all the rise in prices. The cry will be to sit heavily on the prices of food-stuffs on the ground, that they must remain where they stand, whatever may have happened at other levels affecting the lives of cultivators in one way or another, the idea being that the price of food-stuffs at the base of the life pattern will detrimentally affect all prices. The country cannot prosper or be happy with the peasants, the weavers and other artisans repressed and consigned to suffer all the weight of administrative mis-management. It would be foolish for the business community to be happy over their escape from any new direct levies. They will have to prepare for difficult days as a result of these indirect taxes.
