Tax-Payers in India and Social Security Required

The Union Government is trying best to expand the Tax-payer base, thru programs like Jan-Dhan a/c, emphasis on Aadhar Card, enhanced Direct payments via Bank accounts, Demonetisation, encouraging E-transactions etc. If we look at GST and all taxes on public, India would rank as one of the highest taxed countries globally. For expenditure / consumption, these sections are actually paying close to 60% of the income as TAXES. What they are getting in return from government, as social security or easy living facilities ??

Also the high taxation has to be combined with social security of tax-payers; which is practically non-existent in India. Even after paying taxes, people have to save for their medical, child education, retirement, old-age needs; unlike most of the affluent countries, where a lot of these expenses are taken care of by the government, after you have paid taxes on income and spendings. This allows the people to "live in the present" and no future worries, after paying similar tax rates as in India. 

One of the largest tax-payer base is Middle class private employees, businessman, shopkeepers & the small business community, that have been contributing to the GST & IncomeTax Revenue. Government have made many cosmetic attempts at easing the burden by announcing Tax Slabs & establishing exemptions limits on housing, medical, insurance etc., but no serious attempt has been ever made to address the SOCIAL SECURITY CONCERNS of middle-class consumers of India. Eg. Life Insurance Coverage, Family Medical Coverage, Unemployment Pension, Old age pension etc, based on income tax paid by assessee during their lifetime. 

Considering emerging economy environment, some of the most affluent countries such as city states of Dubai and Singapore either donot charge any Income tax or tax at the rate, which is low compared with a country like India. Now if we look at labour and believe that skills are fungible, then would not people want to live in countries where taxation is low?? While cost of living abroad may be high for lower wage earners, for the affluent,  it may actually be lower, a 41% tax on the high income earner, may actually be more than what this person may be actually spending extra in a new country with zero tax to maintain that lifestyle. Would not these people have a tendency to move abroad as long as they can work in the same manner from any offshore location?? 

How many of our pilots, marine officers and seamen (all highly paid by Indian standards), pay any tax in India?? (Since they are working out of territories of india). The point is the more fungible a skill is, easier it is for the skill to move away. Same in case with businesses and investment. Why would somebody come to India to do business if the taxation is significantly higher than elsewhere? Yes, there is an opportunity to make incremental profits, but a large part of that can be realized by manufacturing elsewhere and servicing the Indian market through imports into India. Some of the businesses are very prone to be exported abroad. 

Going forward, India needs to look at taxation differently. Instead of increasing rate of tax, it shall add more taxpayers to increase tax net. Either the government would have to reduce its economic footprint or look at raising tax revenues through different classes of people. It would have to look at taxing the whole of the population rather than taxing a very small part very highly......wake-up to rise-up...

contributed by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com