The plea to abolish income tax beginning with that on income from salary, just because it forms too small a part of the total tax revenue, is not only against what it is pleaded for, namely the cause of the lower income citizens, but also against the democratic functioning of the government.

People unaware of their taxes are prone to take the laws lightly,and in the long run are sure to be alienated from the government even after voting it to power. That is what has exactly happened in India; governments, rather those who man the governments, go their own way and people go theirs.

In 1980-81, a sum of Rs.185.5 crore in tax was due from 5.84 lac assessees on the salary income of Rs.1,155 crore. All assessees (only 14.46 lac out of some 70 crore citizens) were to pay Rs.1,447 crore income tax on Rs.5,013 crore of income. the income tax from salaried people formed about 6% of the Union direct taxes of Rs.3,170 crore which is almost the whole for all the governments.

Now if the total income of all the assessees assessed to income tax was Rs.5,013 crore, wherefrom did we get Rs.16,575 crore of indirect taxes in the same year? Did it sway from one pocket of a government to the other? Or was itk received from what we call black money? The fact is that, most of it came from the pocket of the poor, not only through his purchases but also by preventing him from purchasing through escalation of prices and thereby reducing the value of his earnings. What was to be purchased by the factory worker from his earnings, went (and still goes) to thej governments by way of duties and taxes on goods. Zopadpatties and slums are a direct result of such a policy. In view of the indiscriminant indirect taxes, exemption from income tax of agricultural income is not only a hoax but also a fraud on the citizen. The Prime Minister in his US press conference, acknowledged the existence of tax on agricultural sector, that it too is being taxed, but only indirectly and, I may add, substantially.

What is true for agricultural income should certainly be true for salary income too. In the circumstances, does the exemption from income tax carry any meaning? And the use that the exemption to agricultural income is put to, is rather well known to be mentioned here. Exemption of the salary income, if ever a reality, cannot be so used.

In recent years, the share of indirect taxes in the total revenue has achieved new heights, 85% as against around 65% in the fifties, which in effect means that we have become less democratic over the time. Even during the British rule we have not experienced such extensive indirect taxation. the Fiscal Policy announced by the Union Government on December 19, 1985, promises to reduce the share of indirect taxes vis-a-vis that of direct taxes in the tax revenue. This is perhaps the only significant factor of the whole exercise.

Per the Policy, if the rates of direct taxes are to remain constant for the next five years, and if its share isk to increase, it naturally follows that proceeds and, therefore, the rates and gamut of indirect taxes must decrease. But the simplification of the excise by the new Excise Tariff Act does not lead to that conclusion. A perusal of the definition of the term 'manufacturer' is sufficient as an example. My suggestion is that at the end of the duration of the new Fiscal Policy, that is five years from now, only those products which are likely to achieve an annual production of Rs. 1 crore under one single roof, only those requiring mass production facility, should be subjected to excise duty. These items should be specified and not like Item 68, N.E.S.(not elsewhere specified).

At the same time a ceiling on the rates of Sales Tax imposed by theState Governments, becomes imperative. This should be 3% on specified items only. N.E.S., here also, should be done away with.

Percentages of tens and fifteens, fifties and hundreds, as tax rates on commodities are a sure invitation to fiscal chaos, not to speak of the impact on that rare commodity, morality, which under the circumstances put to taxing strains. After all, money does not make 'resources', it is the resources that make, generate money. All resources converge to one entity, the citizen. Why not ask him directly for his money as he is asked for his vote?

In my opinion, a ratio of 3:2 between direct and indirect taxes should be maintained. A government thast shirks from demanding and getting its taxes directly from the citizen cannot be expected to enforce any other law. Excessive indirect taxation means absence of accountability, absence of responsibility, in short, absence of governance.

Back