50 Years of Indirect Taxes

India, in the words of Jawaharlal Nehru, had her tryst with destiny on 15th August, 1947. On the day, the Union Jack of the British Empire was lowered for ever and the Indian Tricolour, the symbol of sovereignty of the People of India, took its place up the mast. With the Tricolour, also soared the hopes and aspirations of the people who, though illiterate and poor, had high spirits. The Mahatma, who had led India to independence, was at the time kept by the same destiny in Bengal, quelling communal violence, far away from the historic ceremony at the Red Fort at Delhi. On the 15th August, 1997, it is 50 years to that day and the time to take stock of affairs, whether `We, the People' have worked towards the fulfillment of those hopes and aspirations.

The great Jawaharlal Nehru, who led India in the initial period of independence, erred most in two of his beliefs which he imposed on India. One, he thought himself to be indispensable for the country and in so doing brought into play personality cult. After 10 years in office of the prime minister, on 15th August, 1957 he should have resigned making way for others and setting up a precedent. To this day political leaders in India believe themselves to be above the people and, therefore, indispensable. No leader ever vacates the office, held by him on the strength of the people's vote, unless kicked out by the fate.

The other error that Nehru committed was to rely on indirect taxes for revenue, thereby not only depriving the poor citizen of his most secular, casteless, classless identity, but also of his pride of being a tax payer, for such taxes are collected, one should say extracted from the citizen without his knowledge. Without this sense of being taxpayer, the citizen does not have self-esteem vis-a-vis governments nor does he develop any civic sense of public behaviour. Nehru also forgot the opposition by Mahatma Gandhi for the tax on salt, the consequent Dandi March Satyagraha and the letter in that respect written by the Mahatma to the then Viceroy, Lord Irwin. The Mahatma in the letter emphasised that such taxes were unbearable for the poor of India because they are collected irrespective of the capacity of the individual citizen to pay.

It is indeed a pity that the elected representatives have surpassed even the British in the quantum of indirect taxes, the revenue from which is about 85% of the total. On the 15th August, 1947, at the end of the British rule, the excise duty was on only 13 commodities including salt on which it was first levied in 1862. There was no such item as `not elsewhere specified' in respect of these taxes. The percentages of tax too were very low, almost nothing in comparison with the prevailing rates though they have been, in respect of the Central Excise, recently brought down. It should also be remembered that sales tax in the states was imposed to compensate the loss in excise revenue due to prohibition on liquor. That prohibition continues only in the state of Gujarat.

The excise duty in plain terms means that the commodity should not be used by most of the people. The commodities under excise, like liquor and drugs, have to be injurious to health or moral of the people and the tax is for regulating production and use of these substances. But the prime consideration of our elected representatives whether in Central, state or local governments, has been to keep the people, especially the poor and the downtrodden, in the dark about the taxes paid by them. It has now become a tax on productive employment. With sky as the limit for the percentages of these taxes, we have had the facade of rich governments of the poor people.

But that richness of the governments is at a price. They become impotent in other respects especially in enforcement of the law lest that should antagonise the voters. Populism at the cost of people themseleves becomes policy of governments. Even traffic rules at city squares cannot be properly enforced by such governments. Whatever little enforcement is there, is for collateral purposes and not for the purposes of the state.

Recently, in less than a month, the government spent about 12 lac rupees on the medical treatment in a foreign country of a past prime minister. At Rs.1500/= per month an ordinary Indian will have to work for 66 years to attain this amount and that too if he does not spend anything towards his food, clothing and shelter, all of which are taxables. Was it to this end that we banished the British rule and abolished the gaddies/thrones of raja-maharajas, even their privy purses ?

Octroi is unconstitutional, in breach of Article 301 and the Central Sales Tax against the basic feature of the Constitution. They fracture the unity of India as a country and still, are imposed by those who swear by the Constitution for the sole purpose of avoiding direct approach to the voters for tax. The octroi exists on the strength of an item in VII Schedule as if the provisions of the Constitution are subject to the Schedule. India is, indeed, a country of illiterate people who can write but cannot read.

Universal application of indirect taxes have not only made taxpayers out of beggars but even the governments pay each other taxes when they purchase anything from the market. The relationship of tax is a heterogeneous relationship between a state and its citizens. It cannot be between two sovereign states let aside between various governments under the same constitution. But, thanks to universal levy of indirect taxes, such a relationship exists between governments under the Indian Constitution. It is an unnatural, gay sort of relationship inflating only the budgets of the governments having no practical impact on the revenue.

Take for instance petrol and diesel. The Central Government pays to itself the customs and excise duties on the commodity used by it and collects the same from other governments also.. The same is true for state sales taxes and local octroi, as also for other commodities cement, steel, wood and you name it. Because of this, all figures of estimates go haywires and the next year governments increase the rates of taxes without any consideration as to how the poor would live with consequent price rise. The political parties, all of them, in chorus plead for enhancement of limit for income tax which is paid by less than one percent of the people , but they maintain a studied silence over other indirect taxes extracted from each and everybody, from hundred percent of the people.

Territory and taxes are the sovereign functions of a state. A government which cannot defend its territory or cannot directly demand and collect taxes from the subjects/citizens is not worth the title -government. This is especially so in a democracy for, the first information which a citizen must have about his government and which should normally influence his vote, is taxes. `No taxation without representation' is the most basic principle of democratic governments. But the kind of taxes that are levied in India are a mockery of that principle.

The representatives have to be accountable to the people for the use of public funds which factor does not come into play when they resort to excessive indirect taxes for revenue. Even after paying substantial amounts from their earnings, the poor remain under the false impression that they do not pay any tax. That is fraud of the very first order in a democracy. That is how the Indian people have been, during these fifty years, misled in the name of religion, region, caste, class and whatnot, diverting their attention from the most secular thing in the world, money. That is why public property like buses are destroyed in political agitations. The arsonists and the onlookers just do not know that they have paid taxes for that property and will have to pay more for its restoration.

In the fiftieth year of independence, India needs the following:-

1. Imposition of financial emergency under Article 360. It should continue till the amount of interest becomes less than 15% of the revenue receipt of the Central Government. At present the outgo on this account is more than 50%. Till then all government salaries should be frozen, even reduced. Foreign tours at government expense be totally banned.
2. A law regulating political parties and their finances. This should cover enrollment of members, types of members, annual elections of office bearers, maximum tenure of an individual as an office bearer, head quarters and regional offices of the party, the norms for splits -which should first be announced in a convention of the party (a legislature party is in that sense, NOT a political party). Recognition should depend on the strength of ordinary members of the organisation, and not on votes received in an election. The particulars of donations received during a calendar month should be declared and released to press by the 15th of next month. It is an irony and a blot on the political pundits that while people face a law on every step, there is no law regulating parties themselves.
3. Chief and prime ministers be appointed only from the elected members of an assembly or lok sabha.
4. President's rule under Article 356 be imposed only after each house of parliament passes a resolution to that effect by 3/4 majority.
5. There should be a ceiling on the proceeds from indirect taxes, that they should never exceed the proceeds from direct taxes.
6. India is supposed to have secular governments and so, the representative bodies cannot invoke in prayer any particular god. But the following `prayer' may be said at the beginning of every session of all representative houses under the Constitution, and at the start of the day in all government/semi government offices.

"O People of India, you are our masters, we are your servants. We have our food, clothing, shelter and other facilities out of taxes paid by you who include the poorest of the poor amongst you, and that, without your knowledge. We hereby acknowledge this fact and shall remember this while discharging our duties."

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