Taxes are necessary but can be lethal.

When we are ill we are prescribed medicines to get better but taking double the dose does not make us better in half the time. It gives side effects and may kill us. Taxes are a necessary evil, we understand that, but too much taxes strangle the economy and kill it off. Strangely this very simple fact seems too complex for ' liberals ' to understand. The Congress thought that giving handouts to the poor through various schemes would increase growth by increasing spending which would increase profits of manufacturing companies which would then have to employ more people to increase output. Win win all round. However, handouts need trillions of rupees in a country of 1.2 billion people. Increasing direct taxes are of mo use because only 35 million people pay income tax and the vast majority are salaried workers, including government employees. So indirect taxes, such as excise, customs, value added tax and service tax were levied on everything they could dream of. To make it easier a small list of services, mainly government and agriculture, were exempt from service tax and we were forced to pay tax on anything else we did. That had exactly the opposite effect to what the handouts were supposed to accomplish. Prices sky-rocketed, demand fell and growth tanked. It is a mystery why hotshot economists could not understand the simple fact that as prices rose the increase in prices was also being taxed. This meant that the government was taxing inflation and inflaming it. Sadly, this simple fact seems to escaped the present Finance Minister as well. " In recent times, among indirect taxes, service tax has shown highest rate of growth....To broaden the tax base in service tax, it is necessary to prune the negative list and exemptions to the extent possible. Accordingly, the negative list has been reviewed," he said in his budget speech. We understand that India desperately needs to upgrade our infrastructure. It is not enough to have 4 lane highways. If we want to be like Germany we need 10 lane highways. The government plans bullet trains, starting with one between Mumbai and Ahmedabad. This will connect Mumbai, the financial capital, with Surat, the diamond polishing center, Vadodara, with its industrial hinterland, and Ahmedabad, the capital of Gujarat. Excellent idea. But it will kill off flights between these cities because airlines are burdened with huge taxes on everything, from fuel tax to airport charges to service tax, and will not be able to compete. It is possible the BJP is hoping to steamroller a Goods and Services Tax bill through parliament which will combine all taxes and ease the burden. We shall see.