Date:18/07/2005 URL: http://www.thehindubusinessline.com/2005/07/18/stories/2005071800340800.htm

Back Needless taxation

SUCCESSIVE Finance Ministers in India have found it hard to resist the temptation of raising existing taxes and imposing new ones without first exploring whether the proceeds they expect to mobilise from them could be realised from within the Government itself. They seem to have always looked upon taxation as an end in itself, and not as something inextricably connected with every aspect of the economy and with the management of households. In this era of convergence and connectivity, any tax has a multiplier effect far beyond the immediate incidence and determines the accessibility, adequacy and availability of goods and services which is what economy is all about. Likewise, the economy too impacts on the nature, scope and extent of taxation.

Without setting the economic house in order, it is futile to look upon taxation alone as a cash cow. To be strong, viable and sustainable, the economy should be built on the foundations of dynamic political, corporate and business leadership, high quality of governance, a facilitating and responsive bureaucracy and synergistic partnership among government, public and private sectors and the civil society.

If it takes three-to-four months, on an average, to complete the formalities for starting a business in India as against one month in China and one week in some industrial countries such as Australia and the US, or if the turnaround of a ship at the ports takes thrice the time taken, say, in Singapore or London, the economic loss can very well be much greater than what the Finance Minister may rake in by means of fresh taxation.

Taxation should not be used to cover up failure to raise the economic performance by effective governance and plugging leakage of revenues that occurs because of maladministration and corruption. The Finance Minister, Mr P. Chidambaram, would have had no need to take recourse to additional taxation at all, if only he had ploughed into the coffers revenues of Rs 50,000 crore and more envisaged by the K. P. Geethakrishnan Commission on reducing staff expenditure, levy of user charges and pruning of subsidies. This would have obviated the need for more or new taxes. Will the Finance Minister listen?

B. S. Raghavan