High Costs, Taxes and poor us !
Imagine a situation, in which you're having a lavish car but no proper roads to drive it, where you're sick and the remedy is only government hospitals, where you're living your esteemed life but no security to it, where you buy products but no proper governing body to check the quality of the goods.
At last, imagine a second situation in a world where you get a potential satisfaction of what that product is intended to provide. Which one would you prefer?
Think about it. Take a minute and think about it again. Which one do you prefer?
Obviously the second option right? Yes, we intend to purchase goods and services in which we can derive complete satisfaction.
Similar is the case with taxes. In the Indian economy and households, it is a negative term as to what would happen if you pay taxes and according to them nothing happens and the government just collects money from us for free. In fact, some intelligent people argue as to why we have to pay taxes when living in our own country after all we're paying for rents and other needful expenses that if provided to the government would be a bad investment, rather save it for future, right?
Something right is happening here, where people are saving money for their own good, which is great and exceptional and I think each one of us should think about savings and use it purposefully and why to pay to government unnecessarily which is of no use.
But think in a different way, what better would happen if taxes are paid on time by every citizen?
There would be a high standard of living, meaning access to better healthcare, better roads, better government service, better education in govt schools and institutions, safety at borders and near our homes by policemen, and unlimited things which we haven't even dreamt of.
Such is the potential of taxes in an economy.
Let me explain you with an example when you run a household or your home on your salary or your business profits and then you get your home cleaned every day, get a better education for your kids, access to good quality food, hire a security person who would safeguard your house at nights from criminals and take care of it in your absence, plan for a better future, make investments and plan for a debt payment if you have any and get things under control as soon as possible and in tight budget where growth is multiplied but what if you don't have enough resources to afford all these facilities what would happen then? You take a loan? If you're not able to repay the loan, what would you do? Cut your expenses and level down the standard of living which you're experiencing presently? Ever thought about it?
Whatever first comes to your mind is the present situation of the country.
To explain it better let me provide another related example, India is our home and as Wikipedia also says India is a home for 1.3 billion people and when you're living in a home you'd obviously be requiring all such services as mentioned above like security, quality of food, better healthcare and better transport facilities too. Similarly when your household doesn't have that much money to afford such lifestyle quality is at stake.
The country gets is salary from taxes, which is revenue to the country and government spends it on numerous initiatives like healthcare, food provisions, transport like road maintenance, security at the borders and near home and similarly repay the loans to the creditors which the country has sought a loan from.
Such complex is the case when it's concerned with taxes. No money no quality no facilities. As simple as that. The government doesn't get revenue to provide such services back to its people.
To understand it better let's go back in time, tax is not a new concept initiated in newly independent India, it's in place since the times of emperors and kings to provide better facilities to provide in a much more common way where some in the society may or may not have access to it. So to provide such services at large those kings used to spend it wisely in the interest of the citizens like education, sanitation and water, security systems, food security, healthcare, eradication of poverty and other administrative purposes which would make people's lives easier.
Countries get developed entirely on the basis of collective responsibility of paying taxes, which is why countries like UK, US, Germany, China, Russia, Denmark, and others have managed to become developed countries where they have set up systems in place where taxes are used in best way possible and eventually people have realized it's best for themselves to pay taxes.
When in a deficit of taxes countries seek loans from international organizations like IMF, IFC, IBRD, ADB, ECB alike. These banks provide heavy loans to countries for developmental activities like poverty eradication, building dams, flyovers, constructions of new roads and highways and much more.
When providing such loans those banks consider a variety of terminologies that are often complex to understand and out of or purview and we're indirectly connected to all these things.
To understand this better and have a conceptual clarity let's start with types of taxes
Around the world, there are 4 types of taxes which can go onto some 70-80 sub-types maximum
- Income Tax which is taxed on your income like salary, profession
- General Sales Tax or GST which is imposed on the goods and services availed in the country
- Property Tax which is imposed on the land ownership of the concerned person, which is again invested in developing those communities and provide better facilities and
- Excise Duty or tax which is imposed to regulate the import and export plus control the economy
When we look around the world more than half the population in the UK around 56% population pays taxes, France around 50% in the US 44%, Germany at 42%, Turkey at 25%, Pakistan at around 10% and India at 17%. These percentages of people have paid taxes in their respective countries. Needless to say the growth and standard of living of such countries are higher where the no. of taxpayers is higher.
We need services which are top class but the taxes paid are relevantly lowest.
As per Wikipedia, the present loan debt of India is $ 520 billion through various sources and the tax revenue is $ 210 billion. There is a deficit of of$ 310 billion yearly. This is not a story of 1 year or 2 years but loan repayment happens to be over a period of time which other expenses in hand for running the country. The tax revenue is the result of just 17% population in India.
It's evident that tax revenues need to be increased and more people should join this wagon. But why the tax rates get increased. The recent tax bracket in the 2019 Finance Budget is not welcomed by many making most of the people liable to pay taxes.
The present tax-exempt is up to INR 5 lakhs. Earlier it was INR 2.5 lakhs until 2018 and whatever amount is in excess of the exempted tax amount is that amount was taxable.
let's say my salary is INR 5 Lakhs per annum, as per the earlier tax-exempt I'm liable for a 25,000 tax and now I'm liable for INR 50,000 tax
At last, imagine a second situation in a world where you get a potential satisfaction of what that product is intended to provide. Which one would you prefer?
Think about it. Take a minute and think about it again. Which one do you prefer?
Obviously the second option right? Yes, we intend to purchase goods and services in which we can derive complete satisfaction.
Similar is the case with taxes. In the Indian economy and households, it is a negative term as to what would happen if you pay taxes and according to them nothing happens and the government just collects money from us for free. In fact, some intelligent people argue as to why we have to pay taxes when living in our own country after all we're paying for rents and other needful expenses that if provided to the government would be a bad investment, rather save it for future, right?
Something right is happening here, where people are saving money for their own good, which is great and exceptional and I think each one of us should think about savings and use it purposefully and why to pay to government unnecessarily which is of no use.
But think in a different way, what better would happen if taxes are paid on time by every citizen?
There would be a high standard of living, meaning access to better healthcare, better roads, better government service, better education in govt schools and institutions, safety at borders and near our homes by policemen, and unlimited things which we haven't even dreamt of.
Such is the potential of taxes in an economy.
Let me explain you with an example when you run a household or your home on your salary or your business profits and then you get your home cleaned every day, get a better education for your kids, access to good quality food, hire a security person who would safeguard your house at nights from criminals and take care of it in your absence, plan for a better future, make investments and plan for a debt payment if you have any and get things under control as soon as possible and in tight budget where growth is multiplied but what if you don't have enough resources to afford all these facilities what would happen then? You take a loan? If you're not able to repay the loan, what would you do? Cut your expenses and level down the standard of living which you're experiencing presently? Ever thought about it?
Whatever first comes to your mind is the present situation of the country.
To explain it better let me provide another related example, India is our home and as Wikipedia also says India is a home for 1.3 billion people and when you're living in a home you'd obviously be requiring all such services as mentioned above like security, quality of food, better healthcare and better transport facilities too. Similarly when your household doesn't have that much money to afford such lifestyle quality is at stake.
The country gets is salary from taxes, which is revenue to the country and government spends it on numerous initiatives like healthcare, food provisions, transport like road maintenance, security at the borders and near home and similarly repay the loans to the creditors which the country has sought a loan from.
Such complex is the case when it's concerned with taxes. No money no quality no facilities. As simple as that. The government doesn't get revenue to provide such services back to its people.
To understand it better let's go back in time, tax is not a new concept initiated in newly independent India, it's in place since the times of emperors and kings to provide better facilities to provide in a much more common way where some in the society may or may not have access to it. So to provide such services at large those kings used to spend it wisely in the interest of the citizens like education, sanitation and water, security systems, food security, healthcare, eradication of poverty and other administrative purposes which would make people's lives easier.
Countries get developed entirely on the basis of collective responsibility of paying taxes, which is why countries like UK, US, Germany, China, Russia, Denmark, and others have managed to become developed countries where they have set up systems in place where taxes are used in best way possible and eventually people have realized it's best for themselves to pay taxes.
When in a deficit of taxes countries seek loans from international organizations like IMF, IFC, IBRD, ADB, ECB alike. These banks provide heavy loans to countries for developmental activities like poverty eradication, building dams, flyovers, constructions of new roads and highways and much more.
When providing such loans those banks consider a variety of terminologies that are often complex to understand and out of or purview and we're indirectly connected to all these things.
To understand this better and have a conceptual clarity let's start with types of taxes
Around the world, there are 4 types of taxes which can go onto some 70-80 sub-types maximum
- Income Tax which is taxed on your income like salary, profession
- General Sales Tax or GST which is imposed on the goods and services availed in the country
- Property Tax which is imposed on the land ownership of the concerned person, which is again invested in developing those communities and provide better facilities and
- Excise Duty or tax which is imposed to regulate the import and export plus control the economy
When we look around the world more than half the population in the UK around 56% population pays taxes, France around 50% in the US 44%, Germany at 42%, Turkey at 25%, Pakistan at around 10% and India at 17%. These percentages of people have paid taxes in their respective countries. Needless to say the growth and standard of living of such countries are higher where the no. of taxpayers is higher.
We need services which are top class but the taxes paid are relevantly lowest.
As per Wikipedia, the present loan debt of India is $ 520 billion through various sources and the tax revenue is $ 210 billion. There is a deficit of of$ 310 billion yearly. This is not a story of 1 year or 2 years but loan repayment happens to be over a period of time which other expenses in hand for running the country. The tax revenue is the result of just 17% population in India.
It's evident that tax revenues need to be increased and more people should join this wagon. But why the tax rates get increased. The recent tax bracket in the 2019 Finance Budget is not welcomed by many making most of the people liable to pay taxes.
The present tax-exempt is up to INR 5 lakhs. Earlier it was INR 2.5 lakhs until 2018 and whatever amount is in excess of the exempted tax amount is that amount was taxable.
let's say my salary is INR 5 Lakhs per annum, as per the earlier tax-exempt I'm liable for a 25,000 tax and now I'm liable for INR 50,000 tax
| For representational purpose | |||
| Year | Tax amount exempted | Tax slabs | Tax payable |
| 2019 | ₹ 5,00,000 | 10% | ₹ 50,000 |
| 2018 | ₹ 2,50,000 | 10% | ₹ 25,000 |
Technically the exempted limit is not available anymore Any amount more than the upper end will get you taxed at the whole amount earned.
But government now and predominantly always tries to target business communities to pay taxes as that's the easiest way.
Agriculture accounted for 23% of GDP and employed 59% of the country's total workforce in 2016.
Industry accounts for 26% of GDP and employs 22% of the total workforce. The services sector provides employment to 27% of the workforce and provides 54% of the GDP and agriculture is the most stressed sector too. Industries like Financial Services, retail, and Tourism contributed 34%, 22%, and 9% respectively due to the new measure of Jan Dhan Yojana and Digital India initiatives for payments.
Introduction of GST removed several indirect taxes that weren't reaching it to the government often creating opportunities for tax evasion and corruption where transactions go undenoted. Although there was a good amount of sales since the transaction was not noted then businesses used to report losses or fewer sales and evade taxes too.
Due to the new initiatives most of the tax collection is streamlined like GST in terms of goods and services sold, excise duties on various goods imported. But the real problems lie in income tax and property taxes.
Most people fear that they have a small job and expenses too are high and in fact, their income is not even taxable if it is less the INR 5 LPA tax bracket. But this info needs to be filed.
There is a difference between income tax returns and income tax filing.
Income tax returns are recurring taxes to be paid on an annual basis and filing is just showing a statement of income and expenditure which gets recorded in the government database and you come under the label of tax filer.
Tax filing and tax payment both come with numerous benefits which many of us know not.
One aim of taxes is also to make people spend money so that there is enough money in regulation if this doesn't happen and people save their own money then there'll be a day when there'll be no money in the market to regulate the market or the economy. That's why the government asks to maintained bank accounts and started Jan Dhan Yojana to make every Indian an account holder so that cash is deposited, banks use that money in a better way and provide interests on your savings, spend the cash digitally making the society cash-free.
Taxpayers get their taxable amount in return if they invest their savings or some amount in insurance, deposits, and bonds.
How much ever the transactions are conducted in an organized way as prescribed by the government, that much better would be your CIBIL score which shows your financial health.
Each and every financial activity you do is connected to the PAN card via the PAN no.
And when you apply for the banking products and services like loans and advances that financial health would be the core of all the process.
We see many of the areas in and around the city is so tacky, tier 3, undeveloped, no proper services by the local municipalities is because the local government doesn't get any revenue from that area hence the services are low too. And that's the vicious circle where the blame game happens.
As said above, where more than 55% of the population pays taxes and it is that the tax is more than 50% of the income earned for the citizen and people happily pay for that because they are entitled to each and every facility from education, to healthcare to sanitation and water to food, transportation and even providing salaries during unemployment crises for its citizens. And there's a difference in the way they operate in terms of children and provide all the basic facilities because they consider them as a country's citizens who will be a responsible part of the country and not divided by caste, religion, surnames or even parents, etc.
SO my friend such is the essence of taxes in an economy or a country which is interrelated to numerous things and providing the ultimate benefit to us, the citizens in every way possible for that better life which other countries are already living.
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