Tax vex

In recent times, the government machinery has shared data that indicates a rather unimpressive figure on taxpayers and tax collections. A cause of worry is definitely that in 2015-16, direct taxes contributed only 51 per cent of the tax revenue, lower than the government’s expectations and the lowest since 2007-08. Dig deeper and it appears that only 2.9 crore Indians filed personal income tax returns for the assessment year 2012-13—that is less than 4 per cent of the 76 crore adults counted in the 2011 Census. A further scrutiny into this figure of 2.9 crore tells a different story—half of them did not pay any tax.

The failure on part of the government to bring more people under the ambit has been a failure—an acceptance which has resulted in the higher collection of indirect taxes. So, the many people who think they are not paying taxes are mistaken, as there is a service tax and cess that is paid by them on several items that have become part of life that nobody realises its impact, or better, their contribution to such taxes indirectly.

That these indirect taxes are paid by a lot many more Indians does not mean that the contributions are uniform. A detailed peep into the expenses of an average middle class Indian will indicate the high outgo towards indirect tax; effectively they contribute more than what appears by way of their contribution to taxes. In fact, their contribution is more than many others who are wealthier if you look at the sum they spend on essentials.

Towards the late 1990s, to increase the base of taxpayers, the government had initiated a one-by-six scheme according to which if anyone satisfied any of the six conditions listed, the individual was liable to file tax returns irrespective of their total income. The list included ownership of a property, a car, telephone, credit card or anyone who made a foreign trip and membership to clubs with a threshold annual fee. Did this move help increase the tax net? Yes, it did. But, by early 2000s, the rule had served its purpose and was discontinued.

I think it is time the government brought back a similar scheme where the list should include ownership of SUVs, bill payment beyond a sum on electricity consumption, travelling by first AC in trains, membership to clubs, etc; re-introduce these and maybe use the Aadhaar-linked bank accounts to mine the data and throw up more possibilities into the list. There will be many protestors, but those who are already filing taxes have nothing to worry, it is only those who are outside this purview who need to worry. More importantly, the government should match existing databases available to prevent tax evasion and inclusion of new people into the tax net, than going after those who are already paying taxes. As taxpayers as a cohesive unit are not a political vote bank, government do not see their pain and leave them to pay tax on everything.