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Tax rates depend on how far we want to go as a Nation

Tax Rate Cuts

Every year when the Budget comes, people everywhere expect Tax Rate Cuts. They consider it a small part of “Tax Reforms”. Its an annual ritual, and it nearly always ends up in disappointment because the Govt is either seen reducing Direct Taxes and increasing Indirect Taxes, in other words, giving in one pocket and taking out of the other one, or the rate remains unchanged and government is simply seen adding news areas into taxation to increase Tax base.

India’s population is growing at a pace where we will soon beat China. Our need for employment, education, healthcare, need for expansionary fiscal policy, need for new robust infrastructure to last for next 50-100 years, need for more powerful armed forces to maintain dominance over wider geography, including land and maritime areas, and our need to sustain natural resources and agriculture to cater to burgeoning population, all are on the rise. Every single item on this bucket list needs serious money to be invested even if they are undertaken in a PPP mode by the government.

Yet, for some strange reason, people expect Tax Rate Cuts. Why? Because last year or last two years government collected more tax than usual. Why do we want the government to squander it away on us? In any case, these taxes were collected from Corporates or high income groups, not middle class.

Indians want to be a super power, but we do not want to invest in Super Power India. We want the government to finance it, but we do not want the government to have any source of rich income. We don’t want government to run its own PSUs. We only celebrate disinvestment. We also want government to cut the tax rates. Well, sirs, how do we settle this paradox?

Modi Government’s Perspective

Though initial utterances have been made again and again, yet, somehow a key message from the Modi Government has not percolated down enough for everyone to have a top of the mind recall.

If you will think carefully, in the initial years, Narendra Modi and Amit Shah spoke in terms of 25 years or 50 years. Many thought they are talking about their own rule at the Centre. That may be incidental. But that is not full justice to the grand leadership of Prime Minister Narendra Modi.

Narendra Modi has marked a change in generation of India’s Leadership. He is the first Prime Minister of India born post-Independence. It’s a fact he has himself emphasized on the eve of his swearing in ceremony in May 2014. A Leader who is conscious of this is not looking at what he can do for this nation in 5 years. He is looking at what he can do for this country for the next 50 years.

Smart City, Make in India, Bullet Train, Indo-Pacific Domination, Direct Transfer of Benefits, National Identity Card, Train the Trainers, Agricultural programs like Soil Health Card, focus on Agriculture Yield, integration of North-East and tapping Human and Natural Resources in that region, all are part of preparing today’s India for the next 50 years.

The Prime Minister is calling this a New India. He has re-emphasized this New India Vision in World Economic Forum at Davos too. His Ministers throughout this period are emphasizing on New India. But message is yet to reach the bottom of the pyramid.

Invest in New India

If we want to see this New India to fly out of the paper into the real world, it will need real money and real execution. This real money comes from our Taxes. And very few pay taxes in this country. Till the Direct-Tax Base of India remains at a mere 4% or so, it is unreasonable to expect Tax Cuts. Question people have to ask is if government is doing anything to increase Tax Base of India. GST and linking Aadhar Card to PAN is indeed an effort in that direction. Tax terrorism has to go down, Tax base has to go up and Tax rates, well, depends on how far we want to go as a nation.

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