Tax The Rich, Help The Poor

The much awaited annual Budget has been announced by the Finance Minister. After 1991, the Budget has lost its earlier importance in the sense that the economy has been handed over to the market. In western countries, the annual Budget is nothing but a statement of accounts. It is not a policy statement.  In India, from Independence to 1991, the Budget used to be very significant because it indicated the direction in which the Government will go, what it will do for the poor, what it will do for employment,  what it will do for production, exports etc. Now, as one has seen in the last 15 years, the Budget talks only about the corporate sector. What facilities they are giving, what bonds they are issuing, how foreign investment can come in etc. They have nothing to do with the common man. Budgets are now essentially for the rich and the corporate sector. And therefore you will see the comments that come on the Budget are only from that sector. The Opposition, of course, gives comments, criticising the Budget and the usual statements that it is inflationary. In this Budget one good thing that the Finance Minister has done is to tax the rich. We have been suggesting that the rich and the corporate sectors should be taxed. He has put a 10 per cent surcharge which means 3 per cent additional tax on the super rich – it is still less, it should have been at least 5 per cent if not 10 per cent. The rate of taxation, the highest rate of taxation for individuals in India is 30 per cent, for people earning over 5 lakh or whatever is the limit. Over 1 crore,  it should be at least 35 per cent if not 40 percent. The surcharge has been announced for only one year. Why one year? It should be permanent. One crore after all is a significant amount in India and there are only 42 thousand people in India who file returns of more than one crore. They should be taxed at 35 or 40 per cent as a permanent measure. This is my suggestion to the Finance Minister. Secondly, corporate taxation can again increase a surcharge by a very nominal amount and the effective rate of corporate tax will go up by a few percentage points. There is a case for collecting money from the corporate sector. What has happened in India, the direct taxation system in India needs an overhaul. Mr. Chidambaram is the best person who can do it. Just now, the helpless salaried class is paying tax because it is deducted from their salary by the companies or by the organisations where they are working.  Every other  businessman, unorganised businessman who is doing thousands of crores of business in the country is evading tax and the Government is unable to do anything about it. They have tried everything from voluntary disclosure to raids to threats but nothing works. The only people who are paying tax are either the salaried classes or the corporates.  So corporates must collect more tax, the rich people must collect more tax if we are to carry out schemes like MNREGA  to help the poor. It is a very simplistic notion but still relevant that if the very poor have to be helped through cash dole outs, the money must come from the very rich. This is the minimum we can do. Market reforms to be reversed are an unrealistic perspective for this Government. This Government is fully committed to market reforms. It is fully committed to foreign investment; it is fully committed to go in that direction.  But, even within this we can take some steps. Education and health can be streamlined and improved. Insurance cover for the poor can be introduced in a manner which is effective and again, I repeat, the money must come from the rich. Other than that, the Budget really contains nothing because petroleum prices whether it is done in the Budget or outside Budget, the Government doesn’t have much leeway to do anything. How much subsidy can it give on diesel, kerosene and LPG. Similarly, Railways, after 10 years of not increasing the fares, the Railway Minister increased fares some few months ago. I do not want to go into that because these are services and services have to be paid for. The very poor don’t travel. So really the railway fare increase does not hit the very poor. The very poor are in their villages, they are landless labour, Dalits. As I said earlier the new Budgets do not give a policy direction. What is required is a social component of the Budget. What are we doing for Dalits, what are we doing for minorities?  Yes, for the women they have announced one or two things including a new bank   it is welcome. But something should be positively done for the Dalits and for the minorities. Unless it is done and seen to be done, I am sorry, in this the current economic policy we are facing a social unrest, a scenario which may unfold after a few years. Of course, it is an election year, the Finance Minister has done whatever he could but till the Finance Bill is passed in the next 2 or 3 months, I can only give a suggestion : that there is still scope to tax the 42 thousand rich people and the corporate sector.


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