The Agitation For Reduction Of Taxes

All taxes are ultimately levies on what men earn. There is no logic or sense in having a number of miscellaneous varieties of taxes, such as gift tax, expenditure tax, wealth tax, death duties, etc. A single tax, viz., income-tax can be levied from those on whom it can be reasonably imposed and at rates which are considered expedient in the national interest. Most of the other taxes really serve no feasible social purpose or objective except to bring revenue and they should disappear, reliance being firmly placed on a single income-tax.

     The salaries of official posts may be so fixed as not to involve the administrative work of assessment and collection of income-tax on salaries. A great deal of official work can be saved by such a simplification of taxation and such refixing of salaries. Any loss of revenue as a result of these reforms would be slight and more than counter-balanced by the economy resulting from doing away with the establishments now employed to administer all these needless complications. And citizens’ time and nerves would also be saved.

     The total income-tax revenue for 1964-65 was Rs 294 crores. As against this, the Union excise and customs revenue total was Rs 1,247 crores. It is a contradiction of the socialist slogan to levy this relatively very heavy revenue on commodities while the direct tax revenue is not even a fourth of it. The indirect tax burden falls overwhelmingly on the poorer sections of the people. If a man buys some kerosene oil, 45 per cent of the price fixed is tax. If one buys sugar, 50 per cent of it is tax. Sixty-two per cent of the price paid for matches is tax. Can one call this socialism or a socialist oriented scheme of taxation? Excise revenue has risen during the last 15 years of proclaimed socialist orientation from Rs 67 crores to Rs 827 crores and customs revenue rose from Rs 157 crores to Rs 420 crores.

     In the present type of economy which the Congress Government has imposed on the people, even the direct taxes seemingly levied on the richer folk, like water flowing always to the lowest level, send their weight down to crush those at the bottom level. If the leaders of the Congress Party aim really at a truly socialistic pattern as is averred, it should levy only direct taxes and abstain from duties on commodities which are purchased by the generality of the people.

     If as I shall be told this pattern of taxation is impossible to adopt because it will not meet the expenditure planned by Government, then the straightforward course would be to confess that what they call socialism is not a practical proposition and to cut expenditure down to suit the size of the national income of the very poor nation that we are. Even at the very low standard of living now prevailing, if we calculate the absolute minimum of spending necessary for a population of more than 40 crores to maintain that standard of living, and the total cost of living of the nation thus arrived at is subtracted from the total national income, it would be seen that it is a monstrosity to levy 10 per cent of the gross national income as tax mostly in the form of indirect taxes which fall on the shoulders of the poorer sections of the people.

     Our economy is still “mixed”, however all-pervasive the interventions of the State may be. As long as private enterprise and investments in such enterprises have not been legally prohibited or otherwise terminated, tax policy should not be such as to render such investment next to impossible. But this principle is ignored when imposing taxes. Savings are made impossible and it is from savings that investment must come.

     Few people know that the late lamented industrialist of Madras, Sri Anantaramakrishnan, who paid the highest personal income-tax in India, because he never made any attempt to evade the law or hide any money, who lived a simple life and ploughed all earnings back into his industrial concerns, which were all owned by him as sole proprietor, and placed all his affairs open to public and official view, died without making any testamentary disposition. He did not die suddenly. He was ill for a pretty long time and lay in bed in full possession of his mental faculties and knew his end was coming. Yet he did not call his lawyers to make any will. Many people ask why was this?

     He did not make any will because he knew that the Estate Duty calculated on his big assets according to the progressive rates under the law could not possibly be paid by any executor be might nominate. Even if all his concerns were put in the market, and were sold off, the executor could not possibly raise the money required to cover the demand. He therefore left it to Government to do whatever it liked with his laboriously built up industrial concerns. He began life as an honest and loyal accountant in Simpson’s and died as a faithful accountant to Government and nation. This is a melancholy demonstration of the folly of the excessive taxation policy followed by the present Government.

     There must be much more realistic thinking before we can possibly feel anything like happy about our affairs. We should no doubt aim at a higher standard of life. It is not only permissible but quite possible of achievement. But the fatal error committed by Sri Jawaharlal Nehru, an error which still sits oppressively on the nation’s neck, was his ambition to achieve improvement through increased industrialization at an impossible speed. The desired speed and the volume and style of improvement aimed at compelled, in the net result, the adoption of a plan of borrowing from abroad which has by its intrinsic fallacy made the whole plan of development an unreality. Over and above this frustration, the plan has imposed a burden of inflation together with unbearable taxation. Interest charges on foreign debts are mounting in addition to greatly increased defence expenditure. When revenue from taxation cannot meet obligations and necessary expenditure, money has to be printed and aggravates the inflation. As a result, instead of improvement of conditions, we have misery; and the nation stands poised on the brink of bankruptcy. The Emergency of external attacks is dwarfed by the internal emergency created by mismanagement of affairs and the launching of ill-conceived expenditure.

     A Reuter’s message from Tokyo which came on Tuesday last week says:

Tokyo, Feb 22.

The Japanese Foreign Ministry said today that India has asked the World Bank and five creditor nations, Japan, the United States, Britain, West Germany and France, for the refinancing of its foreign debts to relieve the growing shortage of foreign exchange. ‘Refinancing’ is a diplomatic term for borrowing again from the same creditor to ‘repay’ what was due to be paid.

India has proposed to Japan that about $ 30 million due for payment by March, 1967 should be ‘refinanced’. The Ministry will shortly start discussion with the Finance and Trade Ministries as to whether or it to agree to the Indian proposal.

     Humility and wise management would have enhanced our moral stature and extorted the respect of more prosperous nations, and their unqualified friendship, whereas now they are all our creditors, and we know what respect bad debtors command at the hands of their creditors.