Recently one of India’s much loved entrepreneur, business leader, current bureaucrat and a prospective politician Mr Nandan Nilekani said – Only 30 million Indians pay taxes, that’s 3%. And we(India) need to involve more people into the game to achieve what he calls growth through inclusion. I was surprised to read it. It’s unbelievable.
I still can not seem to get over it. It feels unfair. Why am I dutifully paying taxes when 97% of India isn’t? I have been thinking and talking about it. Does it mean 97% of India earns less than Rs 2,00,000/year?(Those who earn less than Rs 2,00,000/year are exempted from paying income tax) That can not be true. So who are these people who earn money but don’t pay taxes?
0. Corporate salaried employees pay taxes. That is sure.
1. My maid, earns less than Rs 10,000/month, exempted from tax.
2. Auto Rikshaw driver, Rs 500-1000/day, pay taxes? I don’t know.
3. Paani puri & Chai vendor, Rs 500-1000/day, pay taxes? I don’t know.
4. Grocer, earns taxable income, pay taxes? I don’t know.
5. Vegetable vendor, earns taxable income, pay taxes? I don’t know.
6. Business men & Freelance worker, taxable income, pay taxes? I don’t know.
7. Professionals(priests,doctors,lawyers,actors), taxable income, pay taxes? I don’t know.
8. Farmers, Brokers, Property owners, taxable income, pay taxes? I don’t know.
I was thinking about this to increase the number of tax payers from current 30 million to say 100 million, ie. 10%. Some improvement. But the more I think, the more it seems impossible to increase the number of tax payers. Because there is no reliable way to know how much these people really earn. We just have to take their word for it. Unless we route every money transaction through a government monitored payment gateway; Which is not happening, at least for now. And even if it was there, I’m sure people will find ways to beat it. So then how do we increase the number of tax payers? How do we involve more people into the game?? If we did, we could abolish the current unfair Income Tax regime which only involves 3% of the India’s population.
In the same article wherein Mr Nilekani quoted the above figure, he also mentioned that India today has more than 700 million mobile subscribers and some 150 million internet users. Let’s say, of these 700 million mobile users, 500 million make 1 call a day(let’s be conservative). If we attach a tax of Rs 1 per call, we get Rs 500 million in one day. According to this study, we currently have around 150 million cable TV subscribers. We are a family oriented nation; We watch TV with our family, right? Roughly 4 people watch TV together? If we attach a tax of Rs 1/head/day we get Rs 600 million per day. Similarly, nearly 75 million people travel every day in India. That includes Indian Railways + State Road Transport buses + City Metropolitan Transport(buses + Metro trains) + Air travellers. If we attach a minimum tax say Rs 4/head/trip we stand to collect around Rs 300 million in one day.
+ 500,000,000 calls/day x Rs 1/call = Rs 500,000,000/day
+ 150,000,000 TV/day x Rs 4/day = Rs 600,000,000/day
+ 075,000,000 travel/day x Rs 4/head = Rs 300,000,000/day
That’s collection of Rs 1.4 Billion per day. And the tax per head is hardly Rs 6/day, Rs 180/month, Rs 2160/head/year. I’m sure our able bankers and elite economists can figure out a scheme to balance out such a tax structure so that our phone/cable/travel bills don’t shoot up through the sky and we don’t feel the pinch on our wallet. Couple of years ago there was a talk of implementing a revised Income Tax scheme called – Direct Tax Code – I wonder what happened to that.