Do you think that the center’s reliance on indirect tax revenue, has deprived the government of resources during the COVID crisis? Comment (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· The taxation policy of the Indian government has been problematic on two grounds. Not only has it been pro-rich (and anti-poor), but it has deprived the state of important fiscal resources — both particularly damaging in the context of the COVID crisis.
· Another example is the imposition of fresh cesses such as the Swachh Bharat cess and Krishi Kalyan cess in addition to GST. The permanent nature of these cesses has been widely opposed by the states and criticised by the CAG, who has pointed out the lack of transparency and incomplete reporting in accounts on the utilisation of amounts collected under cesses.
· This happened at the cost of relaxing the lockdown and weakening social distancing measures. The Centre made a similar move by increasing the duty on fuel by a record Rs 10 per litre on petrol when global crude prices have been falling — another move that was neither pro-poor nor favourable for demand but speaks of the government’s increased dependency on indirect tax-based revenues.
· To address the issue, a group of income tax officers suggested higher taxes on the super-rich, alongside a COVID relief cess of 4 per cent for all those earning above Rs 10 lakh. However, the report was rejected by the Centre and some of the officers were punished for their audacity.
· Higher taxes on the super-rich could be used for cash transfers and a fiscal stimulus, that, in India, at 1 per cent of GDP each, have been negligible so far. Though India surpassed its comparable neighbours on the lockdown stringency measures, it has still not released significant relief measures to compensate for the economic disruption caused by the lockdown. So far, the government has not fully used its fiscal instruments.
· Deferring tax payments, with continued late fees and penalties on filling extensions and slashing corporate taxes is not the appropriate approach towards reviving the economy. With the Centre’s fiscal deficit reaching nearly 5 per cent of the GDP, and tax revenues likely to remain subdued over the next two years, the government needs to do more.
· A wealth tax, a COVID-19 cess on the super-rich and a surcharge on the super-rich for their income from listed equity shares are critical for mitigating the current situation. Such measures would also play a key role in reducing both income and social inequalities.
· COVID-19 may be a blessing in disguise if it allows India to reform its tax system in order to make it work towards inclusive growth and sustainable development rather than targeting only investment-led economic growth. After all, India’s tax-GDP ratio was only 10.9 per cent in 2019, as against the OECD average of 34 per cent.
K. V. A 4 years
Pls review
IAS Parliament 4 years
Good attempt. Keep Writing.
SURYARAJ 4 years
Please review
IAS Parliament 4 years
Try to underline the key points and stick to the word limit. Keep Writing.
SURYARAJ 4 years
