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2018: A year full of promise
The new year looks like it will be a year of competitive politics. With the General Election nearing, expectations are high that relief may be on the cards this Budget. The Modi Government is poised for development but growth should come with a lower tax burden
The year 2018 is a week old and has raised people’s aspirations — there are hopes all round. The first day of the year showed the core sector growth hitting a 13-month high and car sales grow highest in four years to cross three million. It also raised problems for the Government, as the indirect tax kitty tightened. And the Government is now toying with higher direct tax realisation to manage revenue shortfall.
So, a new year is just another year and whatever will be, cannot be prevented. It is also the year that prepares for the next general election. So, expectations are high that the Government will roll out a few sops in the Budget to be presented after three weeks.
The new year will also see transformation of politics in the south, with cine star Rajinikanth making an entry, as also various political parties in the north and many in the south and even North-East toying with new alignments. A rapidly growing BJP-led NDA is matching those alignments, making new friends within its fold.
Will this competitive politics and the ensuing Budget bring some relief to the citizens of the country? Ideally, it should. The biggest hope is in direct taxes, particularly after US President Donald Trump made a massive cut in corporate tax from 35 to 21 per cent and income tax rates to create jobs.
Therefore, relief may be on the cards. But the Indian income tax department is under pressure to increase tax realisation by another Rs 20,000 crore to meet the shortfall in Goods and Services Tax (GST) realisation, which is stated to be at its lowest at Rs 80,000 crore in November, after rate cut to assuage the feelings of voters, even as 5.3 million of the 9.9 million registered for GST paid the tax.
Hopes are pinned in the 14.4 per cent increase in direct tax receipts till November; disinvestment realisation of Rs 52,000 crore, Government’s hope of special dividends to the tune of Rs 25,000 crore from public sector firms and Bharat-22 exchange traded fund yield of Rs 14,500 crore. The merger of ONGC and HPCL is expected to garner Rs 30,000 crore for the Government. This brings an additional Rs 1.21 lakh crore.
The Government will, thus, not be in a tight situation to not pass on some benefits to the electorate. The Government needs to lower income tax rates as also various tolls and other charges. The US suffered a high tax regime, leading to Trump reforms. India needs to follow up on that. This, to not only give the taxpayers some relief but also to boost job growth and also the economy. The tax threshold at Rs 2.5 lakh a year is low and has not been adjusted to rising inflation since 2010. Even now, prices are rising rapidly despite GST.
If the nation has to progress on growth of core sectors — coal, cement, steel, fertiliser, electricity, refinery products and crude oil — that hit 6.8 per cent in November, faster than five per cent in October and 3.2 per cent in November 2016, direct tax changes are a must.
The Government needs to raise the threshold to Rs 10 lakh so that the taxpayers can avail the benefit of little income in boosting the nation’s progress and happiness index. Rates must be lowered to allow people have extra money so that they can go to the market and increase the sale of goods.
While fixing road tolls, the highest rates are adhered to in India. In the US, rates vary from 50 cent to five dollar and the number of toll roads is not as high as in India. In the UK, it varies from 0.5 pounds to 6.5 pounds and again, there are limited number of toll roads. France and Italy have the highest number and the toll varies from Euro 2.5 to Euro 24.8.
A travel of less than 500 km from Delhi to Lucknow can cost over Rs 900; Delhi-Agra Rs 415 by expressway and by the other highway over Rs 300. Even a trip by taxi from Ghaziabad in Uttar Pradesh to Rohtak or Faridabad in Haryana, will cost Rs 300 in municipal toll as one crosses Delhi and another Rs 100 for entering Haryana — Rs 400 in a day. For trucks, it is much more.
The toll policy has to change and the Government must aim to put an end to it after cost realisation as it happened to a judicial decision on Delhi-Noida DND toll bridge. Tolls must not be for profits. It is a tax on the goods and the people. It adds to inflation and consequently affects growth.
A relook at higher often extortive bank charges, arbitrary deductions of high fees, levying penalties for low balance, reportedly on Jan Dhan accounts as well, and charges for issuing cheque books are working against the Government’s objective of universalising all banks. One needs to remember that people, who do not have money, are forced to have low balances in their accounts. The State Bank of India’s levy of Rs 2,000 crore penalty on low balance accounts is counter-productive. Many start ups face so many taxes and hassles that they prefer to close down. They face several income tax notices and valuation problems. Many move out of India.
The Government is poised for development. It is under pressure of more revenue realisation. But it must remember that higher tolls or taxes has a bearing on the development of the people. Average income of Indians are low. The Government has limited capacity to augment, despite the intention to raise universal basic income to Rs 7,620 a year with poverty and hunger alleviation the stated objective.
It would cost five per cent of the gross domestic product, besides a high cost of implementation. It can also lead to drastic changes in social security and welfare systems. There can also be unpredictable changes in the labour market.
Till such time, the Government is in a position to do it, let us keep various tolls and taxes at a low rate. Universal observation is that a nation that keeps tax burden low, progresses faster. It brings down income inequality and gives less leverage to the rich to manipulate or extort. The year 2018 has many promises but it is linked to how tax burden is lowered and benefits to the people is increased.
(The writer is a senior journalist)
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