Monday, October 26, 2020

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Rewarding the honest

Rewarding the honest

Tax reforms were a long-standing demand by the salaried class. Will PM Modi’s measures go far enough?

Income tax-paying citizens of our country have often argued that they are the most ignored lot of voters by the political classes despite them “paying” the most to the Government. While there is a feeling of sympathy for them, one has to understand that while the incidence of income tax payers is low in our country, almost every Indian contributes to nation-building through indirect taxation. That said, the income tax system in India has become unduly complex over the years with all sorts of exemptions and cess payments as well as innovative ways for individuals and companies to escape paying up. The beginning of the reform process came in the form of simpler slabs, announced by Finance Minister Nirmala Sitharaman during this year’s budget, while the existing slabs with exemptions remained. This could be seen as a start for the simplification of the tax code although the impact, particularly on charitable donations, remains to be seen.

In essence, the reforms announced by Prime Minister Narendra Modi yesterday, that will impact personal income taxpayers, are relatively simple. However, increased digitisation will have a dramatic impact on the way disputes and issues are handled. Fewer “informal” ways of dealing with the taxpayers, with all communication digitised, will lead to fewer discrepancies and most importantly, reduced corruption. There is an overwhelming sense in India, despite punitive action taken over the past few years, that the taxman is a corrupt rent-seeker. These reforms might not do much for the taxpayer for now, but if implemented well, could help rehabilitate the image of the much-maligned taxman. Much work remains to be done to improve the methods of tax collection. Thousands of loopholes remain. In particular, the rich have taken advantage of them for years, including the infamous “farming income” being non-taxable. These gaps need to be plugged. Everyone should be made to pay their fair share of tax. If they do so, the nation will only benefit and the Government will not be seen as always attacking the honest salaried worker’s wallet with its money-grubbing hands. The reforms might be mainly some lip service but if they can spark a change, that would be a positive step.

Courtesy: Editorial-The Pioneer

Rewarding the honest

Rewarding the honest

Tax reforms were a long-standing demand by the salaried class. Will PM Modi’s measures go far enough?

Income tax-paying citizens of our country have often argued that they are the most ignored lot of voters by the political classes despite them “paying” the most to the Government. While there is a feeling of sympathy for them, one has to understand that while the incidence of income tax payers is low in our country, almost every Indian contributes to nation-building through indirect taxation. That said, the income tax system in India has become unduly complex over the years with all sorts of exemptions and cess payments as well as innovative ways for individuals and companies to escape paying up. The beginning of the reform process came in the form of simpler slabs, announced by Finance Minister Nirmala Sitharaman during this year’s budget, while the existing slabs with exemptions remained. This could be seen as a start for the simplification of the tax code although the impact, particularly on charitable donations, remains to be seen.

In essence, the reforms announced by Prime Minister Narendra Modi yesterday, that will impact personal income taxpayers, are relatively simple. However, increased digitisation will have a dramatic impact on the way disputes and issues are handled. Fewer “informal” ways of dealing with the taxpayers, with all communication digitised, will lead to fewer discrepancies and most importantly, reduced corruption. There is an overwhelming sense in India, despite punitive action taken over the past few years, that the taxman is a corrupt rent-seeker. These reforms might not do much for the taxpayer for now, but if implemented well, could help rehabilitate the image of the much-maligned taxman. Much work remains to be done to improve the methods of tax collection. Thousands of loopholes remain. In particular, the rich have taken advantage of them for years, including the infamous “farming income” being non-taxable. These gaps need to be plugged. Everyone should be made to pay their fair share of tax. If they do so, the nation will only benefit and the Government will not be seen as always attacking the honest salaried worker’s wallet with its money-grubbing hands. The reforms might be mainly some lip service but if they can spark a change, that would be a positive step.

Courtesy: Editorial-The Pioneer

Rewarding the honest

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