Dr. Javed Jamil welcomes a uniform tax at the national level but suggests that the taxes should be mainly on the accumulated wealth rather than on Income and Expenditure.
Having a uniform tax at the national level is a welcome move. But the problem is that the world philosophy of Taxation based on taxing Income and Expenditure rather than accumulated wealth is so much tilted in favour of the rich that it ends up in accentuating an already dangerous economic disparity with every passing day.
The Government’s GST move is not bad in terms of the uniformity of its application at the national level. There will be a uniform tax all over the country. Prices will become constant everywhere. Initially, the prices of some items will go down. Will this remain the same in the course of time is a question that immediately haunts the mind. It was necessary to show to the masses the positive side of GST. So, they are being told that the prices of many essential items will go down. But once GST becomes fully functional, whichever the Government, the tendency will be to increase the taxes up to the highest level allowed. The ultimate aim of course is to make the common people rather than the Corporate and the Super Rich to contribute the maximum to the State revenue. With almost no tax on the accumulated wealth, the value of their wealth will continue to go up, the inflation will remain high and the common people will hardly be in a position to have some assets in their name.
Let me explain in brief why the taxes should be mainly on the accumulated wealth rather than on Income and Expenditure. A middle range income group ends up in giving a large portion of his income (may be up to 40 pc) in various taxes, including Income, GST, house tax, taxes on electricity, water, etc. Isn’t this too much a burden on his shoulders? Further, when we tax Income and Expenditure, we forget that individuals are not the same in terms of their liabilities. Ten persons having, for example, an income of Rs 2 lakhs a month will all be different in terms of their liabilities. Some may have much bigger expenditures on account of living in different conditions than others. Some may have larger families to sustain, some may be living in their own houses or the houses inherited from their parents; others may have to live in rented houses. Some may have to spend more on some medical issues in the family than others. With the same income, one may find himself much richer after 10 years than the others. So this system is boon for some and highly cruel for others. If instead, we tax accumulated wealth, we have taken care of these individual variations.
What is to be understood is that earning and spending are good for the larger economy; accumulated assets in individuals’ hands are bad. In the current system, we are punishing people for doing what is good and not what is bad. In my previous works, I have shown that less than 15 per cent of the total revenues collected by the central and state governments come from those who own more than 85 pc of the country’s wealth.
The rich, particularly the big industrialists, know that they have no option but to contribute to the revenue of the government. They are however hard bargainers. A major part of what they pay as taxes is recovered in multiplied amounts through the friendly policies of the government and by manoeuvring the ministers and officials to favour them. Thus, despite the fact that several alternative forms of taxes such as wealth-tax and luxury tax have been time and again mooted at different platforms, it is the income tax and sales taxes of various kinds that continue to hold sway in almost all the countries of the world. Income tax serves only the interests of big businesses, and has devastating effects on the economic interests of the rest of the nation.
The industrialists prefer the income tax over the wealth tax due to several reasons. First, the income tax envisages a tax only on the preceding year’s income and has nothing to do with the cumulative assets which keep on growing. It can be easily noticed that the value of the assets held by the affluent is always many times greater than their annual income. Thus, the income tax is the minimum possible amount they have to pay. Secondly, it is easy to evade income tax through subtle manipulations of the rules, purchase of assets which are bought either surreptitiously or are shown to have been purchased at much lower than their real prices, display into accounts of much greater expenses than actually incurred, and bribing the tax-collectors.
The damaging effects of income tax are multi-fold. The black money sustains its upward march; the prices keep on soaring; the land, the houses and the other immovable properties become costlier. Thus inflation helps the rich in strengthening their hold over the economy; for the value of the assets amassed by them continues to grow, their annual turnovers increase, and whatever they have to pay as income tax, or as interests on the loans, is more or less neutralised. They conceal their own incomes, convert their savings into assets and avail their resources as sureties for taking huge loans from the banks and financial institutions. It means that the loans are availed only by those who do not need them; those who are in need of financial support, have little chances of getting their application for loans accepted. All these damaging effects on economy can be reversed by introducing assets-tax.
The other taxes, namely, the sales tax, the excise duty and the customs are paid not by the manufacturers or traders but by the customers. These taxes add to the cost of goods, and whenever there is an increase in the rates of these taxes, the resulting spurt in prices causes additional burden to the shoulders of customers. It would not be wrong to assert that the coffers of the state are filled, not with the money of the big businessmen, as they claim, and is also generally understood, but, with the money of the lower, lower middle and upper middle classes. What a travesty of social justice and the welfare system! The billionaires pay as taxes what they have amassed through manipulation, deceit and sordid machinations, and want to be paid homage for the “great service” they are doing to the nation or mankind. And it is through the enormous influence wielded by these payments that they blandish the government to implement “economic reforms”.
“Reforms” almost always mean actions that would help the big business almost always, if not always, at the cost of the people. Anything that favours people without any benefit to the market is the antidote of reform, and media quickly dubs such people friendly policies as “populist”. It is not that the government is unaware of the truth. It is happening because the government finds it somewhat less tedious, and more because the men controlling the government are regularly pampered by the industrialists. It is not the interest of the government or the nation it governs but the interests of the ministers and officials that coincide with those of the barons of the business world. The result is that the grand exploitation of the masses by the industrialist elite and their minions continues unabated.
The time has come when we need to debate the whole taxation policy afresh. The people need to be made aware of what is happening by those who understand the hidden motives and have concern for the masses.
[Dr Javed Jamil is India based thinker and writer and Head of Chair in Islamic Studies & Research, Yenepoya University, Mangalore, with over a dozen books, including his latest, “Muslim Vision of Secular India: Destination & Road-Map” and “Qur’anic Paradigms of Sciences & Society” (First Vol: Health), “Muslims Most Civilised, Yet Not Enough” and other works include “The Devil of Economic Fundamentalism”. He can be contacted at [email protected].]