India, China & Malaysia want to be full-fledged members of the global financial system but insist on regulatory systems designed to ensure tight control.
Many of the young men who came of age in the wake of India’s economic liberalisation now find that the opportunities and lifestyles represented on the internet and television linger just beyond their reach.
Just as the economic waste of centralised planning is being realised, the failure on the agricultural front is also making a dent on doctrinaire thinking in the Soviet Union, AD Shroff wrote in 1964.
ThePrint had previously reported that India & Russia are talking about 5 more regiments of the S-400, but no contracts are to be signed during the Russian president's visit.
The India-South Africa series-defining fact is the catastrophic decline of Indian red ball cricket where a visiting team can mock us with the 'grovel' word.
Media is biggest culprit in preventing the government to allow market forces to control prices or rule of law prevail or pursuing reforms. See how media is declaring all failed businessmen as culprits and cheaters without understanding their problem. It also start playing tape of food shortage and any price rise which may not be very bad for middle class. In short media amplifies small issues facing middle class or any one so much that it requires government control at PM?CM?DM level only. It is because of media that all problems should be solved by only these three people. It has rendered all other administration useless. We do not need so much media especially TV channels.
If one carefully scrutinises Modi’s record as Gujarat CM, it becomes pretty clear that his economic policies/beliefs always lay to the left. Unfortunately in the obsession of chasing him up for Godhra, most mainstream journalists completely ignored his economic record. For all his disdain of Nehru, strangely Modi’s economic beliefs completely match those of India’s first PM, rather than those of Vallabhai Patel who he professes to admire. Like Nehru, Modi believes government knows best. He believes that rather then focusing on a government’s core functions, it should get involved in running businesses, places of religious worship etc. Rather then getting rid of unnecessary laws, rules and procedures Modi thinks that all that is needed is a more government , that enforces these more effectively. Not sure if the middle class can be blamed for this as so far India has never had a government with conviction in right wing economic policies. Crony capitalists will be happy with a captive market, but not sure how it’s benefits Middle class if they have to pay higher prices and taxes to buy local goods.
There is a given tax structure which any new government inherits. Based on cannons of taxation or any other empirical or theoretical foundation, it is difficult for it modify tax structure as it looks at expenses side first (including promised further subsidies etc) and works backward to match expenses with taxes. In this process, some rationalization of tax structure may take place but no major changes can happen, as total income must match projected expenses. Jaitley could have attempted overhaul of the entire architecture of budgeting including direct taxes but he wasted his time. We are a heavily taxed country and hence, can not afford to enter into free trade agreement with say ASEAN as our goods will be out priced. There is little hope from Modi 2.0 as well given how FM presented her first budget. Perhaps Modi 3.0 can take up this challenge of developing new architecture for budget where it will fix tax level at reasonable levels and budget to spend on social sector by DBT and eliminating all subsidies, introducing wealth tax, taxing agriculture income, single rate GST with refund for eligible poor etc. In short, taking Singapore as its model. It is doable if corruption is removed and inefficient administrative costs are drastically reduced with minimal government, maximum governance approach.
Dear Mr Barsode, you make an interesting argument that’s it’s difficult to effect change. So much so that you don’t see the govt being able to do anything wrt the taxation structure for the next 4 years. And being an understanding person that you are, you give your favorite govt 9-10 yrs for the same!!
It’s almost like a teacher allowing a student pass by default in every year of a program even if he fails repeatedly , by saying that yes the course is indeed tough and the teacher is sure the student will do a better job 2 yrs hence!!
The salaried middle class bears the harshest tax burden.I can’t believe adequate mohalla kirana shops , adequate traders , sweet/mithai shops disclose proper income. Do I see substantial self employed professional fraternity disclose actual income? Do they provide bill for services?
Another Important area high net worth cultivators do pay they I. tax ? Has purchase of High end luxury cars stopped with source as agricultural income ?
Last but not the least from my school days I heard of hoarding food grains ..edible oils ..Creating artificial scarcity . Did Mr Adam Smith ever discuss and predict bonanza in tax collection from increased demand .
May it be mentioned that Indian patients paid more for same Stents et all then their European counterparts as per my knowledge. It was discussed amongst stakeholders to arrive at an acceptable solution.
Your response perfectly illustrates the deep distrust that the middle class has about business. This attitude is pretty widespread and, sadly, there is some truth to it. However, we are now in a loop – we seek to regulate and control businesses because we don’t trust them, and this makes it hard for them to run their business and exposes them to rent collection. The net result is that the successful businesses are ones that can navigate manage stifling rules and work hand-in-glove with rent collection. In a Darwinian way, we have created the perfect environment for increasing regulation and increasing corruption.
You have identified part of the problem; however, it is less about middle class pampering and more about middle class values which percolate in all aspects of governance. Middle class is distrustful of business. The overwhelming narrative is that those who are involved in business are crooked. The solution to it has always been to increase regulation. This in turn makes it hard to do business. Getting around regulation opens the door to further rent collection. As a result, the successful businesses are the ones who are able to deal with complex rules and are complicit with rent collection. The result is a petri dish where corruption and regulation are locked in a feedback loop.
The examples of this are all around us. A few years ago, airlines increased ticket fees and baggage charges. With the hue and cry in the media, the politicians and bureaucrats jumped in and introduced a whole set of complicated rules. Today we have airlines going broke but who remembers the little roadblocks that we create while airlines were functioning well. The hue and cry over bananas also reflect a bureaucrat taking it upon himself to right the “evils” of capitalism – never mind that the hotel was paying GST honestly and the consumer was perfectly capable of paying.
The first step in fighting corruption should be to reduce the need for corruption so that honest businesses can succeed, and the second step is punish the guilty. Indian judiciary works in exactly the opposite way also. Our courts, reflecting the same social morality, demand increasing regulation while punishments take decades, if at all. Modi’s efforts for enforcing laws and reducing corruption are creating the dynamic that complex rules followed honestly will prevent business growth. The middle class values are often the core values of a society. As long as the middle class is unable to appreciate the hard work and the creativity of a business, we are going to be a slow moving society where legal and bureaucratic constraints prevent honest and successful businesses.
1. This article is provocative in the sense it provides an opportunity to readers like me to write on subject of tax and tax administration. 2. I begin with my views about a few misconceptions. (a) First misconception is that today’s tax regime is pro-middle class. Fact is that the government in power (irrespective of which party is in power) usually makes every effort to retain power. To retain power the government tales liberty of making appropriate changes in existing taxation as also other policies which may appear to be pro-middle class. I think such tweaking of policies is considered ‘normal’ in a democracy. (b) Second misconception is that if the government collects more tax, it is considered a progressive or pro-poor government, which is far from true. I think more than the amount of tax collected what is relevant is right, pro-poor impact of government expenditure. (c) Third misconception is that if the government earns higher tax revenue, it can spend more on welfare programmes for the poor. It rarely happens this way. Past experience tells us a different story. Though we have spent huge amounts on pro-farmer programmes, these programmes have benefited mainly the rich and politically influential farmers, who are better networked with the ruling class. Is it not true that this happens, irrespective of the party or alliance of parties in power? 3. My observation is that we have to rely on bureaucracy for everything the government does and it is here the problem lies. Fact is that no political party in power is interested in taking disciplinary action against inefficient and corrupt government officials, particularly in the middle and lower level. When government earns more tax revenue, there are Pay Commissions who promptly make recommendations to utilize a good part of higher revenue for revision of pay, allowances and benefits like the DA linked pension. 4. Tax-free agricultural income is a very effective vehicle used by politicians, government officials and of course business community to evade tax. No political party has shown courage to tax agricultural income or to close loopholes in our tax law provisions which make tax avoidance/evasion quite easy. 5. My last observation is that to minimize scope for tax evasion, particularly of indirect taxes, there should be good coordination between the Central and State governments. Unfortunately there is very little cooperation today and that leaves scope for tax evasion.
I don’t think the middle class is ” pampered “. The bedrock of much that India has achieved since 1947, also a major source of income tax. One would feel tempted to say that farmers – at least the large ones with assured irrigation – are pampered, but that would be insensitive if one considers the extent and intensity of agrarian distress. 2. A party of the Right does not have a natural constituency in India, true. What comes to mind is the Swatantra party. However, it is the task of leadership, through a blend of conviction and compulsion, to do what is good for the country. The last lost / wasted decade in India is visible from outer space. MGMG many thought was a sugarcoated way of saying, We will bring 1991 2.0 and 3.0. 3. Consider power and banking, both in need of structural reform in 2014. Did anyone honestly believe UDAY, Indradhanush, Banks Board Bureau would get the job done. With these two foundational sectors troubled, the wider economy, we manufacturing, exports would all suffer. Even today the resolve to address the issue frontally is missing. 3. How can anyone possibly believe that the economy chugging along in second gear is wonderful for the average citizen, or even for the tycoons and their rent seeking politician friends. Considet the moonscape – littered with craters – corporate India has become, Anil Ambani its most potent symbol. A couple of years ago, all ten ASEAN leaders graced our Republic Day parade as Chief Guests. Today our reform starved economy lacks the self confidence to join RCEP. Idle to believe our place at the global high table is not being undermined by chronic economic underperformance. 4. How to balance, harmonise, prioritise the needs of the poor, the middle class, urban vs rural, all this is the domain of politics at the apex. How the campaign should be crafted, the message packaged is the domain of men like Prakash Kishor. As citizens and voters, we simply want the promised Achhe Din to be delivered. That will not happen without reform. And no matter how incandescent the political game aopears to be at the moment, people tend in a democracy to be a little impatient.
Media is biggest culprit in preventing the government to allow market forces to control prices or rule of law prevail or pursuing reforms. See how media is declaring all failed businessmen as culprits and cheaters without understanding their problem. It also start playing tape of food shortage and any price rise which may not be very bad for middle class. In short media amplifies small issues facing middle class or any one so much that it requires government control at PM?CM?DM level only. It is because of media that all problems should be solved by only these three people. It has rendered all other administration useless. We do not need so much media especially TV channels.
If one carefully scrutinises Modi’s record as Gujarat CM, it becomes pretty clear that his economic policies/beliefs always lay to the left. Unfortunately in the obsession of chasing him up for Godhra, most mainstream journalists completely ignored his economic record. For all his disdain of Nehru, strangely Modi’s economic beliefs completely match those of India’s first PM, rather than those of Vallabhai Patel who he professes to admire. Like Nehru, Modi believes government knows best. He believes that rather then focusing on a government’s core functions, it should get involved in running businesses, places of religious worship etc. Rather then getting rid of unnecessary laws, rules and procedures Modi thinks that all that is needed is a more government , that enforces these more effectively. Not sure if the middle class can be blamed for this as so far India has never had a government with conviction in right wing economic policies. Crony capitalists will be happy with a captive market, but not sure how it’s benefits Middle class if they have to pay higher prices and taxes to buy local goods.
More efficient government
There is a given tax structure which any new government inherits. Based on cannons of taxation or any other empirical or theoretical foundation, it is difficult for it modify tax structure as it looks at expenses side first (including promised further subsidies etc) and works backward to match expenses with taxes. In this process, some rationalization of tax structure may take place but no major changes can happen, as total income must match projected expenses. Jaitley could have attempted overhaul of the entire architecture of budgeting including direct taxes but he wasted his time. We are a heavily taxed country and hence, can not afford to enter into free trade agreement with say ASEAN as our goods will be out priced. There is little hope from Modi 2.0 as well given how FM presented her first budget. Perhaps Modi 3.0 can take up this challenge of developing new architecture for budget where it will fix tax level at reasonable levels and budget to spend on social sector by DBT and eliminating all subsidies, introducing wealth tax, taxing agriculture income, single rate GST with refund for eligible poor etc. In short, taking Singapore as its model. It is doable if corruption is removed and inefficient administrative costs are drastically reduced with minimal government, maximum governance approach.
Dear Mr Barsode, you make an interesting argument that’s it’s difficult to effect change. So much so that you don’t see the govt being able to do anything wrt the taxation structure for the next 4 years. And being an understanding person that you are, you give your favorite govt 9-10 yrs for the same!!
It’s almost like a teacher allowing a student pass by default in every year of a program even if he fails repeatedly , by saying that yes the course is indeed tough and the teacher is sure the student will do a better job 2 yrs hence!!
The salaried middle class bears the harshest tax burden.I can’t believe adequate mohalla kirana shops , adequate traders , sweet/mithai shops disclose proper income. Do I see substantial self employed professional fraternity disclose actual income? Do they provide bill for services?
Another Important area high net worth cultivators do pay they I. tax ? Has purchase of High end luxury cars stopped with source as agricultural income ?
Last but not the least from my school days I heard of hoarding food grains ..edible oils ..Creating artificial scarcity . Did Mr Adam Smith ever discuss and predict bonanza in tax collection from increased demand .
May it be mentioned that Indian patients paid more for same Stents et all then their European counterparts as per my knowledge. It was discussed amongst stakeholders to arrive at an acceptable solution.
Your response perfectly illustrates the deep distrust that the middle class has about business. This attitude is pretty widespread and, sadly, there is some truth to it. However, we are now in a loop – we seek to regulate and control businesses because we don’t trust them, and this makes it hard for them to run their business and exposes them to rent collection. The net result is that the successful businesses are ones that can navigate manage stifling rules and work hand-in-glove with rent collection. In a Darwinian way, we have created the perfect environment for increasing regulation and increasing corruption.
You have identified part of the problem; however, it is less about middle class pampering and more about middle class values which percolate in all aspects of governance. Middle class is distrustful of business. The overwhelming narrative is that those who are involved in business are crooked. The solution to it has always been to increase regulation. This in turn makes it hard to do business. Getting around regulation opens the door to further rent collection. As a result, the successful businesses are the ones who are able to deal with complex rules and are complicit with rent collection. The result is a petri dish where corruption and regulation are locked in a feedback loop.
The examples of this are all around us. A few years ago, airlines increased ticket fees and baggage charges. With the hue and cry in the media, the politicians and bureaucrats jumped in and introduced a whole set of complicated rules. Today we have airlines going broke but who remembers the little roadblocks that we create while airlines were functioning well. The hue and cry over bananas also reflect a bureaucrat taking it upon himself to right the “evils” of capitalism – never mind that the hotel was paying GST honestly and the consumer was perfectly capable of paying.
The first step in fighting corruption should be to reduce the need for corruption so that honest businesses can succeed, and the second step is punish the guilty. Indian judiciary works in exactly the opposite way also. Our courts, reflecting the same social morality, demand increasing regulation while punishments take decades, if at all. Modi’s efforts for enforcing laws and reducing corruption are creating the dynamic that complex rules followed honestly will prevent business growth. The middle class values are often the core values of a society. As long as the middle class is unable to appreciate the hard work and the creativity of a business, we are going to be a slow moving society where legal and bureaucratic constraints prevent honest and successful businesses.
Well said.
1. This article is provocative in the sense it provides an opportunity to readers like me to write on subject of tax and tax administration. 2. I begin with my views about a few misconceptions. (a) First misconception is that today’s tax regime is pro-middle class. Fact is that the government in power (irrespective of which party is in power) usually makes every effort to retain power. To retain power the government tales liberty of making appropriate changes in existing taxation as also other policies which may appear to be pro-middle class. I think such tweaking of policies is considered ‘normal’ in a democracy. (b) Second misconception is that if the government collects more tax, it is considered a progressive or pro-poor government, which is far from true. I think more than the amount of tax collected what is relevant is right, pro-poor impact of government expenditure. (c) Third misconception is that if the government earns higher tax revenue, it can spend more on welfare programmes for the poor. It rarely happens this way. Past experience tells us a different story. Though we have spent huge amounts on pro-farmer programmes, these programmes have benefited mainly the rich and politically influential farmers, who are better networked with the ruling class. Is it not true that this happens, irrespective of the party or alliance of parties in power? 3. My observation is that we have to rely on bureaucracy for everything the government does and it is here the problem lies. Fact is that no political party in power is interested in taking disciplinary action against inefficient and corrupt government officials, particularly in the middle and lower level. When government earns more tax revenue, there are Pay Commissions who promptly make recommendations to utilize a good part of higher revenue for revision of pay, allowances and benefits like the DA linked pension. 4. Tax-free agricultural income is a very effective vehicle used by politicians, government officials and of course business community to evade tax. No political party has shown courage to tax agricultural income or to close loopholes in our tax law provisions which make tax avoidance/evasion quite easy. 5. My last observation is that to minimize scope for tax evasion, particularly of indirect taxes, there should be good coordination between the Central and State governments. Unfortunately there is very little cooperation today and that leaves scope for tax evasion.
Pertinent points, sir.
Capitalist party of India is badly needed.
I don’t think the middle class is ” pampered “. The bedrock of much that India has achieved since 1947, also a major source of income tax. One would feel tempted to say that farmers – at least the large ones with assured irrigation – are pampered, but that would be insensitive if one considers the extent and intensity of agrarian distress. 2. A party of the Right does not have a natural constituency in India, true. What comes to mind is the Swatantra party. However, it is the task of leadership, through a blend of conviction and compulsion, to do what is good for the country. The last lost / wasted decade in India is visible from outer space. MGMG many thought was a sugarcoated way of saying, We will bring 1991 2.0 and 3.0. 3. Consider power and banking, both in need of structural reform in 2014. Did anyone honestly believe UDAY, Indradhanush, Banks Board Bureau would get the job done. With these two foundational sectors troubled, the wider economy, we manufacturing, exports would all suffer. Even today the resolve to address the issue frontally is missing. 3. How can anyone possibly believe that the economy chugging along in second gear is wonderful for the average citizen, or even for the tycoons and their rent seeking politician friends. Considet the moonscape – littered with craters – corporate India has become, Anil Ambani its most potent symbol. A couple of years ago, all ten ASEAN leaders graced our Republic Day parade as Chief Guests. Today our reform starved economy lacks the self confidence to join RCEP. Idle to believe our place at the global high table is not being undermined by chronic economic underperformance. 4. How to balance, harmonise, prioritise the needs of the poor, the middle class, urban vs rural, all this is the domain of politics at the apex. How the campaign should be crafted, the message packaged is the domain of men like Prakash Kishor. As citizens and voters, we simply want the promised Achhe Din to be delivered. That will not happen without reform. And no matter how incandescent the political game aopears to be at the moment, people tend in a democracy to be a little impatient.