Thursday, May 26, 2011

Taxes, we are told, are of 2 kinds - direct and indirect. Direct taxes come from individual income and corporate profits while indirect taxes come from customs, excise, sales tax, value added tax, education and road cess, all kinds of surreptitious add ons that we are not often aware of. Direct taxes are paid by salaried and low income people. Politicians, civil servants and police earn mainly from bribes and loot which, being black money, is not taxed. Companies avoid taxes by sending 2 trucks out through the rear gate for every one truck that exits the front gate. Customers buy products at prices which include taxes which the company has not paid and this is shared with police, inspectors and politicians. Thus, the more the economy grows the more is the growth of black money feeding inflation. Indirect taxes add to inflation and price goods and services out of the range of the poor. Poor people are human and would love to live in a house with air conditioners, own a car and fly out for a holiday but these are deemed luxuries and taxed out of their reach. Surely all taxes are not bad, such as those on alcohol and cigarettes? Western countries show that increasing prices result in decrease of consumption thus improving health. That does not happen in India. High cigarette prices force the poor to smoke bidis, take gutka and khaini which are infinitely worse. When beer costs Rs 100 a bottle it is much better to buy a half bottle of local hooch for Rs 60, enough to make you unconscious. The poor drink to forget their miserable existence, unable to improve because of taxes. The politicians love the poor so much that they keep them poor by high taxes. Fatal love.

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