Building a Better India – Part 4: Identifying tax issues

One of Prime Minister Modi's poll promises was to end this 'tax terrorism' and give relief to not just individual taxpayers from the middle classes, but also to business and small entrepreneurs all across the country

Encouraging and building a non-adversarial tax regime is one of the most pressing needs in India today. Tax laws are complicated, convoluted and often redundant. The officials charged with administering the tax system make arbitrary judgments and commit to rash decisions. Tax-evasion may not be a direct result of this opaque tax regime but it may owe a part of its origin to this. Let us look at the various problems and complexities of the current taxation environment with a special focus on businesses.

Multiple and numerous taxes:

Tax payers are aggrieved due to high and multiple kinds of taxes, duties, levies and cess etc. making compliances and payments difficult and cumbersome resulting in huge wastage of time and manpower. In fact at least 20% of the total official time is wasted only on this account.

Inspector/Bureaucratic Raj:

Due to numerous laws, taxes, duties and levies, one inspector/officer or the other from multiple govt agencies is always sitting on the head of the businessman/industrialist harassing him or directing him to attend to his office to make all sorts of unnecessary enquiries, probe the books and records and somehow find some fault/ irregularity or unintentional lapse/omission to create a case to demand graft. Most of these public servants who treat themselves as Super Boss having powers of arrest and prosecution neither think nor are taught that in absence of business and industries; the  govt will get no revenue to pay for their salaries and for other purposes.

High Incidence of taxes:

An entrepreneur somehow arranges interest bearing capital by mortgaging his assets, invests the same in business with great risk, works tirelessly for the success of his business, faces great harassment in the hands of public servants/bureaucracy, pays excise duty, VAT, TOT, trade licence fees, Octroi, profession tax, P.F, ESI and so many other taxes; and then is forced to cough up income tax @34% of whatever profit is left to himself.

No person feels comfortable in paying such huge income tax particularly considering the fact that if his business falters and start making losses due to any reason; the government or the tax agencies will neither rescue him nor give him any relief. Hence the incidence of income tax needs to be suitably and equitably reduced for better compliance and the govt should strive for higher revenues by adopting the simple business technique of maximisation of profits through high volumes with lower margins.

Large portion of Tax payment gets wasted:

The other genuine grievance of tax payers is that a big portion of his tax payment goes waste in payment of  salaries of govt staff, interest on loans taken by governments, gets plundered in the distribution chain of numerous  government schemes and subsidies or on wasteful revenue expenses and is not productively utilized .

One of Prime Minister Modi's poll promises was to end this 'tax terrorism' and give relief to not just individual taxpayers from the middle classes, but also to business and small entrepreneurs all across the country.

Albert Einstein once said, “The hardest thing in the world to understand is tax.” Let's hope the government takes quick steps and proves Einstein wrong atleast on tax.

You may also want to read

Building a Better India-Part1: How to create a smaller and smarter government

Building a Better India-Part2: Transforming political landscape

Building a Better India – Part 3: Bringing systemic changes in constitutional bodies

(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)



S K Nataraj

2 years ago

You pay taxes and governments( Chandrababu Naidu & Manmohan Parikkar splurge on loan waivers and junkets to Brazil for the World Cup. Our hard-earned money evaporates like this!

Nagesh Kini

2 years ago

Dalbirji - this is from one once practicing CA turned concerned citizen activist to another turned business man. What better is the CA profession but another business devoid of morals and ethics? Actively conniving with fraudsters like in the cases of GTB,Satyam and now MCX. The auditors were patently negligent.It didn't require a Forensic Audit By PwC - post-Satyam where they were the statutory auditors it tantamounts to a pot calling the kettle black or was it a case of 'set a thief to catch a thief'. Why was a tainted MNC firm once blacklisted by the RBI again assigned this job? Are there no equally competent CA firms in India?


S K Nataraj

In Reply to Nagesh Kini 2 years ago

I fully endorse your comments. Very well said. How many scams have surfaced, one after the other in rapid succession, and world- renowned audit firms were found wanting in the discharge of their professional duties. It took a person like Vinod Rai to expose certain mega goof- ups in certain areas of government. But PWC and certain Directors of the erstwhile Satyam Computers, of whom one was an ISB bigwig, failed to notice what was going on in their own company led by the chieftain-at- large, Ramalinga Raju. We should have stringent laws to punish the audit profession too. The existing laws won't do. A Jignesh Shah, a Saradha Ponzi schemes guy, , a Subrata Roy -- all managed to evade the law for quite some time, until the law did indeed catch up finally.
The examples I would quote here are the ones in the U S where Rajat Gupta has been punished for insider trading and the Barings Bank case in Singapore in which Nick Leeson was sentenced in a very quick trial. Financial misdeeds need to be handled in this sort of firm, tough manner.

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After canteens and mineral water, Tamil Nadu gets 'Amma Salt'

‘Amma Salt’, an initiative of the Tamil Nadu Salt Corp, will now be available in the open market across the state at prices lesser than those of private producers

Following the success of pro-poor canteens and mineral water schemes, the Jayalalithaa Government on Wednesday launched 'Amma Salt' in Tamil Nadu.


Termed as yet another pro-poor measure, the Jayalalithaa Government launched three varieties of low-cost salt named after the Chief Minister herself.


Jayalalithaa launched ‘Amma Salt’ at the Secretariat in Chennai, which follows up her government’s earlier initiatives like the subsidised ‘Amma’ Canteens and ‘Amma’ Mineral Water.


Jayalalithaa is addressed as ‘Amma’ (Mother) by her supporters.


The Tamil Nadu Salt corp has launched three varieties — Double Fortified, Low Sodium and Refined Free Flow Iodised Salt — under the ‘Amma’ Salt banner.


‘Amma Salt’, an initiative of the Tamil Nadu Salt Corp, will now be available in the open market at about Rs4 lesser than those of private producers.


According to a release, the rates of salt sold by private producers in the market were Rs25, Rs21, and Rs14 for Low Sodium, Double Fortified and Refined Free Flow Iodised Salt, respectively.


The Government will sell the same varieties of ‘Amma Salt’ at Rs21, Rs14 and Rs10, it added.


The ruling All India Anna Dravida Munnetra Kazhagam (AIADMK)’s other freebies include rice, mixer-grinder, fans, and milch animals for respective beneficiaries.


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