January 5, 2013 2 Comments
Did you happen to catch the headlines of today’s ET ?Else here is the link.Its had me pretty steamed up the whole day.
Its no secret that the government is in a financial mess of its own making.Its also true that the general elections are within sighting distance and the government feels the need to be seen to be doing something. Addressing vote banks is obviously a priority.But just how far should a government be allowed to go in its desire to serve itself?
My questions are simply these:
1.)How many of our rich will hang around to be taxed?How many will migrate or otherwise arrange their affairs so as not to be liable for higher tax payouts?At a time when many industrialists prefer to invest abroad since setting up business in India is so cumbersome do we want to drive out more businesses from India What about the lost opportunity to tax these enterprises,if only at marginal rates?What about the lost opportunities for employment of our own people?
2.)Obviously the really wealthy have the means and the knowledge to hire the expertise to avoid taxes.So who are these higher tax rates likely to hit?The newly rich still in the process of building their wealth.Those focused on making more and not yet focused on keeping it from the tax man.Do we rally want to kill enterprise and hard work this way?How is discouraging enterprise likely to help our society in the long run?
3.)Why are we still talking about redistributing wealth?Because we have it as a fundamental duty?While we hare having so many constitutional amendments why not one more?Has no body in the government bothered to read what Profs. Jagdish Bhagwati and Arvind Panagariya have to say on the Gujarat and Kerala Models?Or perhaps its just inconvenient to accept such work as valid?
4.)And if dividends are to be taxed in the same way as any other income just how many Indians will accept the risks?How many will turn to FDs and how many more to gold and property?So how will the Rajiv Gandhi Equity Savings Scheme fare?What about the government’s stated goal of increasing equity ownership among the Indian people?Are FIIs to become the sole purveyors of Indian Stocks?What happens when Indian stock holding is largely in foreign hands?How then will the fundamental duty to ensure the means of production are not concentrated in few hands be served?Or is it OK if it is concentrated or distributed in foreign hands?And what will we do with the bubbles in the gold and property market?Is it so hard to understand that gold and property is out of the reach of many people hence we have the free home and gold distribution schemes funded by the exchequer.
5.)And as for the inheritance tax just what purpose would it serve?If people leave behind an inheritance it is because they made it a priority to do so.In every case it involves a person who has chosen not to consume everything they make to better the lives of future generations.What can be gained by depriving the dead of their last wishes?If the inheritors are foolish with money,even the greatest of fortunes is going to be washed away in no time.Money only stays in the possession of people skilled in its care.The money will automatically flow into other hands and pile up where it finds a good caretaker.Why should the government intervene in the process?Who is to say that the government knows best when it comes to money matters?And should the government be worried about equality of opportunity wouldn’t it be better to ensure equal access to the knowledge to make and keep money than focus on distributing wealth.A person could be porn poor but how long can they remain poor when they are doing the right things to become wealthy?