Who will want to pay if there are no returns?

Too few people in India pay income tax, writes Ajit Ranade. "This year's Economic Survey has a telling graph, a picture that speaks a thousand words. It shows that in Norway, for every 100 voters, there are 100 taxpayers. In India for every 100 voters, we have seven taxpayers. It is as if the voters form the government, and taxpayers help fund it," he fumes. Exactly. That is how our political masters want it. Without a massive 'vote bank' of extreme poverty politicians cannot promise handouts to win elections. India is exactly the opposite of Norway, where the government provides social services for every citizen, regardless of their wealth, whereas in India taxpayers get nothing from the government. In Scandinavian countries, "The fundamental principle is universalism, i.e. in general every individual has the right to help in times of need, irrespective of factors such as income or assets." Education, healthcare and old age pensions are universal in Norway but in India the subsidies are targeted. This divides the nation into payers and recipients. The bulk of taxpayers are salaried individuals whose taxes are deducted directly from their salaries. They feel aggrieved at being forced to pay taxes while those who are self employed are evading income tax by not declaring their earnings. Salaried people are guaranteed certain protections by law. They get paid casual, annual, medical and maternity leave, while the self employed earn nothing if they do not work. Employees get a lump sum amount, called gratuity, from their employers when they retire. Employers are required to match employee contribution to the provident fund scheme which provides for retirement. The self employed have to pay for everything. The richest 1% own 58% of the entire wealth of the country, which means that the vast majority of Indians earn too little to fall in the tax bracket. About one third are laborers who earn daily wages, while 42% of chief wage earners are self employed, and of these over 90% do not earn enough to pay income tax. The income tax threshold in India is set at Rs 250,000 per annum. This is 2.5 times the annual average income of Indians, which is Rs 100,000. According to the National Sample Survey Organisation the richest 20% of Indians have an average annual income of Rs 95,000. So how to increase the tax base? Praveen Chakravarty suggests reducing the threshold to Rs 150,000 per annum, which will bring another 11 million people into the tax net. Perhaps Chakravarty has forgotten the high cost of living and high inflation rate in India. Tax collection could multiply if Indians became richer. But that is too difficult. It is much easier to declare war on boogeymen tax evaders by demonetising high denomination bank notes and then promise more handouts to the poor. Our politicians should stop continuing British practices, and become Indians. They will find solutions.