The burden of taxes

At a time when onset of post-Covid times is being widely mentioned amid an imminent threat of second wave of this deadly infection looming large,  era of unprecedented tax burden has already left one and all in dilemma. The mounting percentage of taxes have ultimately baffled common people who have to  shell out more for less services and products.

Currently unprecedented increase in percentage of taxes has put ‘fuel on fire’. Even as the government has blamed country’s dependence on oil imports and producers controlling output for fuel prices spiraling to a record level where petrol touched Rs.100 per liter mark, the analysts have pointed out that the surge in prices is predominantly due to increase in taxes. On one hand, the high fuel inflation, recorded at 3.87% in January, a sharp jump from 1.62% in November, has fueled anger among general public and on the other, the finance minister revealed the “dharam sankat (dilemma)” of the government over record fuel prices. Despite facing the ‘dilemma’, the government has refused to cut excise duty on oil imports to bring down the oil inflation to reasonable level.

Remarkably, the fire in fuel prices has forced the Reserve Bank of India (RBI) to express worry over core inflation and its governor Shaktikanta Das has put the blame on indirect taxes. If way out of unwinding of high indirect taxes on petrol and diesel is not carved out, there would be further build-up of cost-pressures in the economy. This could even push food inflation at the consumer end, which means more miseries for general public.

Actually, over a period of time, the burden of taxes has continuously been mounting in a sustained manner on the shoulders of a common man. Even at times the government was blamed for levying double tax on a single service or a product through tax reformation measures. On this count there are still many questions unanswered. Today, a common citizen is faced with imbalances on income-expenditure front as they mutely witness a good percentage of their hard earned income being eaten up by wide range of taxes.

Here it’s worth mentioning to quote the sentiment of Oliver Wendell Holmes, Jr. who expressed that “I like to pay taxes. With them I buy civilization.” He meant that he liked his civilization, and he was more than willing to pay the going rate, because it made his life far, far better than it would be otherwise.

Does this sentiment of Oliver Wendell Holmes holds true in the given situation when it’s yet to determine the exact impact of the Covid crisis on the economic landscape? Is paying tax good or bad? What should be the benchmark of paying taxes for a common citizen or even businesses? These are a few, but most important questions which need convincing answers. It’s incredible, but true! In the current regime of taxes, you are even made to pay almost 56% of tax on the cost of a product.

So, this is , precisely, a murky situation. Let’s have a look at the nature of taxation and its impact on the mindset of the society. One thing is sure that you cannot escape tax net of any sort once your income crosses the threshold limits. Are taxes good or bad? Ask this question to anybody and you will learn ‘taxes are bad’. I haven’t found anyone glad while paying tax. For most of the people, paying any kind of tax is painful. So hatred of taxes is deeply ingrained in the society.

This kind of hatred by millions of people has established the metaphors of taxation as a burden, an affliction, and an unfair punishment – all of which yearn for ‘relief.’ In fact the phrase ‘tax relief’ has strengthened the view of taxation as a misery or a burden on the people.

Some time back, while seeking advice from an acquaintance on some tax matters, I was put through some positive ‘untold facts’ of paying taxes. My acquaintance analogued paying of taxes to donations paid as a charitable contribution to the works being done by organsiations for the welfare of the people and the society at large.

So he was trying to explain that when the government as an institution is dedicated to doing good works and promoting public interest, we should not oppose taxes which are basically funding the government activities for public welfare. By standard of this argument, taxes are good and we should feel elated for all the good our tax payments are doing. Contributing toward the public good through payment of taxes cannot be seen as a bad thing. This yard stick makes sense to call the taxes good.

When we look at the technical aspects of taxes, we find taxes as our own dues that we pay to live in a democratic civilized society. Huge infrastructure in all sectors of economy like network of roads, buildings, power etc. available to all of us is in place because of the taxes paid by our previous clan of taxpayers. We as the current tax payers using all this incredible infrastructure pay the dues to maintain as well as expand it.

But who promotes this positive and constructive concept of taxes? Those who collect the taxes know only how to whip a taxpayer forcibly instead of motivating him through education about importance of taxes in the development of society.

Amid all these pros and cons of the prevalent taxation system, one of the real negatives is positioned somewhere else. Those who criticize levy of taxes usually overlook the fact that the taxes paid are exorbitant and strangling in nature. This forcible act has only build up a lot of public resentment about taxes.

There’s an unshakable belief that most of our tax money goes to help people other than ourselves. According to this common negative stereotype the tax money collected is redistributed to such programmes which have been tailored for welfare of people other than the taxpayers. This way taxpayers feel cheated and show resentment while depositing the taxes.

We have a breed of people in upper class of the society who are not paying the taxes fairly. Middle and lower income class pay too much while the wealthy pay too little. At the moment a few questions remain unanswered. How fair are taxes levied? Is the quantum of tax fairly shouldered by various economic segments? Even the ways and means of tax collection bear a question mark on the fairness front. All of these have validated the controversies surrounding taxes in our society.

Meanwhile, levying of property tax in J&K is inevitable after the government of the UT of Jammu and Kashmir started an exercise for the imposition of Property Tax. “In exercise of the powers conferred by the Jammu and Kashmir Property Tax Board Act, 2013, the Jammu and Kashmir Municipal Act, 2000 and the Jammu and Kashmir Municipal Corporation Act, 2000, the Government hereby directs that for the levy of Property Tax on any land or building, the value of land as notified in terms of Jammu and Kashmir Preparation and Revision of Market Value Guideline Rules, 2011 (circle rate) shall be a key determinant of the value of the property apart from the nature of construction, the kind of use, the age of the property or any other relevant consideration”, read the government notification in this regard.

Property tax has its base in the land and buildings. It is not something new in the current global taxation system. It has often been subjected to political debate. This tax has its own strengths and weaknesses. It is near impossible to avoid or evade it after put in place.

However, apprehensions loom large that the rich and powerful who are accustomed to manipulating the tax system for their own advantage may effectively dodge its equitable operation at the political level.

The timing of implementing the property tax in J&K bears a question mark. The region has been witnessing worst political as well as economic scenario during the last three decades. The region has witnessed worst armed conflict which has left thousands dead, maimed and property worth thousands of crores destroyed. Owing to the miseries which have engulfed the subjects of the region, it holds merit that residential property in J&K should not be brought under the ambit of the property tax system.

(The views are of the author & not the institution he works for)