WHY MUST WE PAY THE INCOME TAX
Post demonetization there has been a great upsurge in the number of people who try to justify tax evasion and even advocate for the abolition of the same. I however, have a view which is different from the stated mainstream and would like to defend taxation of income by the state. I would also like to point out as to why the idea of ‘Abolishing income tax’ is a flawed one and also morally incorrect.
In order to understand the argument better we need to answer two very basic questions related to taxation. These are 1. Who are taxed? & 2. What is done of the money collected through taxation?
The primary idea behind taxation is ‘Taking from the rich and giving it to the poor’. The income tax is levied on that section of the society which is able to earn a decent living for themselves primarily by utilising the resources available to them, which also includes the poor and the not so rich section of the society. The revenue generated through taxation is spent on a number of programs and development projects and the majority of these are welfare programs. Thus, justifying the idea (though not absolutely) behind the whole process which, as earlier stated, is ‘taking from the rich and giving it to the poor’.
We have now understood, in a very naive manner, the ideology behind taxation and I am sure that not many would appreciate the same, not many would want to share a portion of their hard earned income with those who are unable to earn a living for themselves. In fact, many have even equated taxation to slavery as it ultimately leads to making people work to earn that portion of their income which they never really get, thus amounting to forced labour or slavery.
So, does taxation really amount to slavery?
If I was to answer this question, my answer would be an outright ‘NO’. I feel that taxation is not slavery instead; it is ‘a mandatory annual payment of the interest earned on a principal’. The deciphering of the description could be a tedious and complex process so let me do it for you.
Let us consider two individuals V & B and a hypothetical situation. Let us assume that these two individuals were born at exactly the same time, on exactly the same date and at exactly the same place and in exactly similar families. They grew up similarly, were fed the same food and sent to the same school. They even had equal IQs but as they grew up they decided to take up a career for themselves, V decided to become a cricketer while B decided to become a footballer. Each of these two was equally devoted to their career choice and they worked equally hard. If quantified, it would be found that the hard work put in by the two was exactly the same. And therefore in a normal case, the outcome should also have been the same. But, this is where the similarity ends. The result of their equal and similar hard work is, unsurprisingly, very different. One becomes a superstar cricketer while the other becomes a mere player in the Indian football team. Despite working equally and despite having no difference in the positioning of stars their cosmic chart (remember they were born at the same place, time and day), one became a superstar and his income grew manifolds while the other remained a mere player in an unappreciated national football team.
The factor which made the difference in the above situation was the ‘Society’ factor. The fact that V became richer than B depended upon the fact that the society in which they lived preferred cricket over football thus, society is also instrumental in making V richer than B therefore V owes a debt to the same which is repaid in the form of income tax. Income tax is thus a mandatory payment of interest earned on a principal; principal being the society’s positive response to what one does.
Everyone who is rich in our country today is not so merely because they deserved to be but because what they do is in cohesion with the needs and demands of their society and it is therefore imperative on the part of these well off people to pay their income tax and that too as an obligation.
WHY SHOULD INCOME TAX NOT BE ABOLISHED
Coming on to the second and the last portion of the essay which seeks to highlight the moral and even economic flaw behind the argument that ‘Income tax should be abolished in order to retrieve black money and to prevent any further accumulation of the same’.
Post November 8 declaration which rendered 86% of the Indian currency in circulation useless, many economists and even aspiring bureaucrats declared the move as impotent and suggested that instead of demonetization, the government should have simply abolished income tax which would have incentivized those hoarding the same abroad to bring it back into the Indian economy. This would have also led to an abundance of cash in the Indian banks which could have then been used in various sectors and schemes. It would even incentivize the people to work hard and to earn more and thereby spend more.
There are two manners in which this abolition of income tax could be done. One way of doing so is by simply abolishing income tax and but not permitting the free and absolute return of black money stashed abroad. This manner of abolition will be a big blow to the government’s treasury and would be an economic suicide for our country. The second manner of abolition of income tax is, abolishing of tax on income and also simultaneously permitting the free return of black money into the Indian economy. This second way is still considerable as it would prevent the government and banks from going broke. It is this second manner of abolition which I have taken into account while arguing against the whole idea of abolition of income tax.
There are many advocates of the stated idea. I however believe that there are a couple of major drawbacks in the plan. There is an economic and also a moral flaw in the plan which renders the same unadoptable. Each of these is discussed below.
1. Economic Flaw
I am not an economist but the economic flaw is quite evident to me and would also be to those who have eyes open to view it.
The plan would only widen the rift between the rich and the poor. Those who have black money will not only get a free course into the Indian economy but would also be instrumental in making the rich richer and the poor as they were. Those who have black money will be able to invest the same in the market and in turn earn more out of it while those who do not will only be mute witness to the corrupt growth and rise of these people. Abolishing income tax would be good only for those who have been wrong all their life where as the true hard working individual will get nothing out of it and if at all then maybe a few substandard and low paying jobs at firms owned by those whose black money has been accepted in the system.
Further, such a move shall in no way be able to fight the menace of corruption or of counterfeit currency.
Thus, economically speaking, all that the move can do is ensure retrieval of the black hoarded in the country and also abroad.
2. Moral Flaw
Let us consider three individuals A, B & C writing an examination for a job. A is the one who has studied hard and writes it morally while B is the one who hasn’t studied for the exam but is afraid to cheat as that may lead to his disqualification on being caught by the examiner ‘G’. C, on the other hand, hasn’t studied for the exam but is ready to take the risk and cheat and has therefore brought a book to the examination hall. The examination begins and all start writing their paper. The examiner is vigilantly looking for the one is cheating but due to his various limitations, he is unable to catch the cheater ‘C’. Up till the half time, things go as they normally should. A is busy writing the paper morally while B has barely written a word and C, on the other hand, is busy cheating cautiously by using the book brought by him. After half time and after failing to find the cheater out of the three, the examiner comes up with a unique way to do so. What the examiner does is that he declares that he wouldn’t punish anyone who is cheating, all that the cheater needs to do is to own up and if possible, also help others cheat. This declaration brings relief for C and he immediately owns up, he takes out the book he had brought, puts it up on the desk and starts writing his examination paper. In order to pacify the examiner and to show like he abiding by the guidelines declared by the G, what C does is that he occasionally lets A and B peek into the book. The exams end and C goes out, un-touched and un-punished with the book in his hand while A and B go out with the plan of brining a book next time they come to write the examination. G, on the other hand, goes out satisfied that he ultimately managed to find out who was cheating if not catch him.
Few days later, the results are declared and unsurprisingly, C scores the highest and gets the job. Despite being the cheater out of the three, C is hailed as a successful person and people start trying to be like him. At a later stage, the trend established by C becomes routine and the whole purpose behind conducting examinations is rendered unachieved.
Abolishing income tax would only amount to the moral degradation of the society and could even lead to chaos like situations. The government’s role as a protectorate would be challenged and the entire equilibrium which ensures peace and solace will be at risk. Revolution will follow and possibly many lives will be lost.
I do support the government for doing what they did to retrieve black money, fight the menace of counterfeit currency and to halt corruption. It did cause temporary trouble but it shall also be good for our nation in the long run and those who say that ‘in the long run we are all dead’ are but selfish. I am glad that people with such a mindset are no longer in power else they would have only exploited our country to fulfil their petty temptations because they know that in the long run they would only be dead. Taxation of income is an important aspect of national life and we must all contribute to it while the government in power must ensure that they use the revenue generated in best way possible and to create conditions which would help citizens earn even more.