Opinion | Salary earners have been squeezed enough2 min read . Updated: 30 Jan 2020, 10:56 PM IST
The salaried in India are voiceless and vulnerable. They serve as a soft target for taxation. But it’s time for our tax policy to relieve a group that bears an unfairly heavy burden
It is fair to say that income tax payers are a hapless minority in India. Within this class is a sub-class of the salaried, the most oppressed. In a country of 1.3 billion, they simply do not constitute a group large enough for their voice to matter in the political scheme of things. They are not a voting bloc by any definition, dominate no electoral constituency for a representative to air their grievances in Parliament, and have no weighty forum to lobby the government in their favour. Caught up in the daily grind of their work routines, they rarely get a chance to look up and cry foul over the taxation policy. Even if they did, a deaf reception is usually all they can expect. This, then, is the lot of those who know they make up just 3% of the country’s citizenry, the few who actually pay income tax. It is a tale of woe that need not be one if the burden is shared more equitably.
Thanks to government efforts to widen the tax net, far greater numbers have been filing income tax return statements in recent years. This counts as a success, but there is reason enough to suspect that a significant portion of those who file these are non-salaried earners who have managed to dodge their real liability by using various tricks of accountancy. Some two-fifths of the returns filed show zero tax payable. Data reveals that the bulk of Indian return filers are in the zero or lowest tax bracket. Given India’s socioeconomic pyramid, this is only to be expected. What is not plausible, however, is that everyone paying nothing or little by way of tax is doing so in full honesty. According to numbers presented in the 2018-19 budget speech made by then finance minister Arun Jaitley, salary earners shelled out an average income tax of ₹76,306 in 2017-19, three times the non-salaried taxpayer’s mean outgo of ₹25,753. This is a stark difference. All the more so because it does not conform with socially observed lifestyle gaps between the employed and the self-employed within the same socioeconomic class.
With several measures adopted by the government to plug tax evasion, one would have expected the tax net to have left little room for escape by now. Either way, it is time for the Centre to cut the salaried some slack. This could be by way of raising the exemption limit above ₹2.5 lakh in annual income. Tax rates could also be rationalized. Reams have been written on the so-called Laffer Curve and how tax collections may actually rise if rates fall. The benefits of a benign tax framework can never be overemphasized. Finance minister Nirmala Sitharaman did well to lighten the burden on corporations last year, lowering the rate of corporate tax to globally competitive levels. This budget, she could slash the top rate of income tax from 30% to a relatively reasonable 20-25%. In return, taxpayers would perhaps be ready to give up some of the rebates that tend to complicate calculations. An elementary canon of taxation is simplicity. As the old wisdom goes, a good tax is one that takes only a few syllables to explain. The need for a progressive system of taxation means that slabs graded by income levels still need to exist. The better off must always pay more. But there is nothing quite like a clean and snappy figure as a tax rate, a percentage with no ifs and buts.