The article is very good but your comment about income tax is completely wrong. India has one of the lowest taxes in the world. In China, VAT is 17% and your income tax may range from 5 to 45% depending on what you earn. Corporate tax is 25%. Until recently this was 33% for domestic companies and 15-24% for foreign companies. No wonder they attracted huge foreign investment. Internal demand is created by huge development projects taken by Chinese government which is funded from this taxes. In many developed countries income taxes are about 40% and you also pay 17.5% VAT. The main problem in India is only a small fraction of people pay tax and most high earners completely avoid paying tax. This is a matter of moral corruption. On one side the argument is why pay tax when all politicians are corrupt and the money is not used for development. Nobody wants to pay tax to Govt, but they have very high expectations form the Govt. The fact is Govt. doesn't have enough revenue to address many issues like Health, Quality Education, water, Sofficient power supply, development, flood defences, rescue operations, new railway/road networks, airports and other rural development. These long term solutions require hundreds of billions of dollars and that will definately kick in internal demand to sustain economy. But most importantly we need a strongly motivated people working everywhere from government offices to research centers.
RE:Good article
by ANAND on Aug 07, 2007 06:34 PM Permalink
Govt Have sufficient money for developements but a big part of that money goes to pocket of currupt people like all leader and govt employees
RE:RE:Good article
by Abhay T on Aug 07, 2007 06:56 PM Permalink
This is actually not true. There is a huge gap between revenue and expenditure. Although you can cut down ministrial costs, it is still massive gap. You haven't thought about massive projects India need. A single city requires 10s of blillions of dollars to improve quality of life.
It is true that politicans are corrupt and earn commission before offering contracts. But, this is true in every country. You belive it or not but even in US, Japan and China high profile cases have happened. But, in India, even a peon in a govt office is corrupt. So, it affects everyone. I have seen some politicians coming from very poor background becoming MLAs and suddenly become rich. This mainly happens because overall moral level in India is very low. Even very honest person is sometimes vulnerable if brainwashed. If 95% officers in a govt. office are non-corrupt then even a minister can't do much. So, in developed countries although corruption happen at higher level, it doesn't reflect in the quality of roads. So, people reamin unaffected. In india, 1% of honest officers have to work with 99% corrupt officers. This is because of very low moral levels. My point is you can reduce tax, but that is not long term solution.
RE:Good article
by Nanda Kumar on Aug 07, 2007 07:32 PM Permalink
Tax is too high in India . Specially after P.Chidhambaram.
When UK/US/Australia; even if you pay more tax; govt is again spending on people; Most of the people get govt aid; if they are unemployed.
I have to pay so much of tax without me or my fellow citizens getting benefitted; I say, this kind of tax is looting the people(monthly salary category).
No way I find acceptable, the tax I pay every month.
Let govt take care its subject rather playing cheap tricks like bringing service tax in every aspect of livilihood
RE:Good article
by Abhay T on Aug 07, 2007 07:56 PM Permalink
The point is not about less or more tax. Only few % of people in India pay tax. Most people are still poor and live under poverty line. Many businessmen and high earners don't pay tax priavtely arguing it only ends up in politician's pockets (similar to yours). So, finally the tax comes only from salaried people who don't have any choice. High % of tax is only a perception because we don't see development. This is only a small fraction of India's population. A part money indeed goes into corrupt politican's pocket and their expenses. But, most part of the money is also used for defence, other govt. expenses, development projects like dams, roads, education and research grants. It is simply not sufficient for a country of India's size and population. Morality and corruption are always going to be an issue. You can't solve that in one night. But once more jobs are created and people's earnings start going up the corruption level will automatically come down. This social change requires at least 50-100 years, because of wide gaps in our culture.
RE:Good article
by Abhay T on Aug 07, 2007 06:40 PM Permalink
Thc conclusion is you can't kick internal ecoonomy by reducing income taxes. This is only a popularist statement. You can only create internal sustained growth by 1. Creating new jobs through massive big projects, such as constuction of new roads, power stations, bridges, rail networks etc. 2. Getting more people to pay tax. Use name and shame policy for high earner who don't pay tax. 3. Using increased revenue wisely. 4. Corruption is in minds. A young, motivated, non-corrupt generation is required in all govt. offices. A charishmatic leader is required who can make this change happen in the mindset of people.
