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20 Jan 2007

Of Taxing Bondage

Posted by Oblivion in General | 8:56pm

Questioning the inevitability of the inevitables is an engaging business. Of the two inevitables - taxes and death - the latter's mystery seems easier to comprehend. As regards the former, I simply don't get why it exists.

There's the State, there are individuals and there are companies. Individuals and companies pay tax to the State on the income they earn, and everyone share the spoils. The higher the employment rate, the richer the State becomes and finds it easier to govern the millions. Fair enough till this point. The moment one starts tracking where his rupee is going to and how it is used, things get vague.

An individual pays tax on the income he earns (goes directly to State), on every product he buys (goes directly to companies), and on every service he avails of (goes partly to companies and State). I'm told the tax he pays is used by State for providing better security and comfort for people. So, if he earns X, pays Y% of X as tax, he and his countrymen get better roads, cables, army, water, electricity facilities and other stuff.

State encourages him to invest in order to save a part of the Y% he pays as tax. Sounds good. But the State isn't so generous. If his income exceeds a certain something, investments don't help save tax further, because the State has progressive tax system in place. Besides, the investments have to be a considerable part of the remaining amount to be counted against the tax paid. So, the chap invests from the income that is exempt from tax in order to cut tax by only a negligible margin.

Paying tax is mandatory for all. On paper. If you are affluent or powerful, you evade tax and nobody can do anything. Those who chant Mera Bharat Mahaan might dismiss this, but, sadly for them, the data support the statement and data don't lie. The poor don't have enough income to pay tax anyways, so it's the middle group that takes the most burden. According to theory, and assuming the State considers everyone as equal, the infrastructure should be provided equally among all. Reality doesn't reflect an iota of this. In every city, there are posh areas. In these areas where majority evade tax, roads are absolutely great, any repairs are attended to with great alacrity and care, electricity hardly goes down, and traffic jams - rare occurrence on these roads - are cleared within minutes. In other areas where majority sincerely pay tax, life is a toil.

In Mumbai city alone, they collect Rs.60000 crores as tax every year. The amount spent is only Rs.20000 crores. So, they save Rs.40000 crores every year from one city. Given that they collect from all places across the country and that they have been doing this for decades, I wonder where all the amount that they haven't spent has gone to. Why doesn't the income-tax department show its annual general statement? If a tax-payer is a stakeholder in State, is it not his right to know where his money is going to? If the State makes it mandatory for all public limited companies to share annual general statements with public, why does it not practise this itself? There are many nations - money economies at that - that don't have income-tax policy and yet are doing absolutely fine, economically and otherwise. Why can't India do that? (Without doubt, there will be theories that explain why it works in those nations and why it isn't feasible in India, but theories just get stronger with time. Change the practice, and theories can be framed around that. No big deal.)

State corners the individual by appealing to his emotions - it associates paying tax to responsibility (another equally popular practice thus promoted is that of exercising your franchise). If you evade tax, you are an irresponsible citizen. The affluent have better incentives to preserve, so they kick responsibility on its face. For the non-affluent, these tags and labels matter, so they derive pride from sincerely preserving these! Virtue is a poor man's Mercedes. Being responsible - without even questioning how true it is - is almost a compulsive obsession with them. And the State continues to exploit. Vicious circle indeed.

Being an utter failure in comprehending the logic of the concept apart, I find the association of the deed with responsibility as an act of mockery by State. If State tells me, "Pay tax or risk imprisonment or, worse, death", I'd find it more honest. Take out the goddamn label responsibility from the equation.

I subject the better part of this damn life to a drab exercise called earning livelihood (of course, this is voluntary so I cannot blame State for this) and pay a part of what I earn to State. I pay Y% of X directly, and then Z% of every damn rupee that I spend of the remaining indirectly as tax (to say nothing of the bribes). If you say Y% is being used for infrastructure development, why do you again ask me to pay road tax, water tax, this tax, that tax, etc? I buy a property from the income that I manage to save after paying tax, but you again ask me to pay property tax. I invest from the saved income in order to save tax, but you ask me to pay tax anyways when the investments turn to returns. I pay tax, live in a moderate house in a middle-group area and you spend that money to provide a better drive for that rich brat's Mercedes, to provide better power facilities to chaps living in centrally air-conditioned villas with power backups, to provide telephone, furniture, transport allowances - amounting to crores of rupees every month - to ministers? Worse of all, you spend a considerable part of that money on defence infrastructure and war! I don't believe in war, I condemn the dirty politics, I don't like to contribute to the extant chaos, but I end up doing the insane deed of contributing, although indirectly, to war and politics. Indeed, some responsible fucker I am!

Working in air-conditioned confines, worrying about next week's movie releases and upcoming travel plans, indulging in grand but pointless discussions about new world order, picking up clever methods of analyses, one learns to shut the door - with a simple act of justification - on some uncomfortable questions. The irony that he may be doing the very deed that he abhors is lost on one. State makes it easy for a citizen - if he joins police or the army, he justifies subterfuge, conspiracy and genocide even though he believes that killing is a sin. Similarly, State makes it easy for a citizen to justify the act of paying tax by making it mandatory. One gets the money after the tax has been deducted. "It's your duty to pay tax, so just pay it and get lost; how it is spent is none of your business", the State says. The chap obliges, trades pride for the deed and moves on. Reminds me of Tata Safari Dicor's copy, "Slavery is not dead. You've just stopped recognising it."

Taking it a little further, one finds good parallels between this practice by State and that by mafia. Mafia also works according to its own laws and demands that you abide by those. Mafia collects protection fee that is proportionate with the size of your business. If you don't pay, you will take the bullet. The fee they collect is spent on the welfare of both the gangs and your community. Once you part with your money, you don't have any right to question how they will spend it. You have to believe unconditionally that they will spend for everyone's benefit. Of course, the practices are not same (on paper, at least) as regards objectives and utility value, but technically there isn't much difference between the two.

Is there no way out?

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1 Comments | "Of Taxing Bondage" »

  1. By vani

    22 Jan 2007, 10:14am [ Reply ]

    Interesting and GOOD socio-economic post! Nice reading it...Have similar thoughts reg taxation

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