Kerala is aiming to become the first state in the country to impose a luxury tax in case of ownership of more than one car in a household even if the cars are owned separately by the husband and the wife. This was one of the many ideas mooted by the state transport minister at the Transport Development Council meeting held in Delhi this week. Not surprising, as Kerala already has a motor vehicle taxation model that is progressively structured—6 per cent for cars costing up to Rs 5 lakh, 8 per cent up to Rs 10 lakh, 10 per cent up to Rs 15 lakh and 15 per cent for anything costlier than that. The flip side is that many buyers of high-end cars prefer to go shopping in Puducherry.
But Kerala’s effort to progressively tax the rich stops there. In fact, the lopsided nature of the state’s revenue model predominantly depends on taxing the poor. A cursory glance at the state’s tax spread in 2012-13 and the picture becomes quite clear.
The single largest revenue earner for the Kerala government during the last fiscal was liquor fetching Rs 5,391 crore. Close on the heels was the sale of petrol and diesel, at Rs 4,527 crore, followed by real estate transactions (stamps and registration fees) at Rs 3,621 crore. The fourth largest revenue grosser was lotteries, accounting for Rs 2,750 crore. It does not require much in the nature of crystal-ball gazing to conclude that a bulk of this money came from the lower strata of society. Therefore, it’s a mystery that a government faced with shrinking revenue resources refuses to tap its super rich who own large tracts of land.
There are only two categories of land owners as per the government records. In the corporation limits, land tax has been fixed at Rs 4 per 2.5 cent (one are) for land holding up to five cent and Rs 8 per are for anything in excess. In municipal areas, the corresponding rates are Rs 2 per are for land holdings up to 15 cent and Rs 4 per are for larger tracts. In panchayats, it is Rs 1 per are for holdings up to 50 cent and Rs 2 for anything bigger holding. In short, nothing has been done till date to differentiate between land holdings of six cent and 60 cent in cities, between 16 cent and an acre in towns and between half an acre and say 10 acres in villages. The result: land tax netted by the state government last year was a woefully inadequate Rs 65 crore. While there are stray voices in the bureaucracy seeking corrective measures, the question is whether the government has the nerve to push through with amendments to rein in the land sharks. What is required is a strong political will to tap this rich taxation option.
As things stand today, it is an onerous task to define Kerala’s economy—the money order tag, or rather the money transfer one being the easy way out. But no self-respecting government would want to settle for that. If Kerala is to stake a serious claim to the self-proclaimed democratic socialist welfare economy label, then it really needs to start cracking on ways to differentiate the super-rich and the rich from the middle class and the poor as far as land ownership goes. And get this revenue segment to start yielding the kind of receipts that currently comes only from the consumers of alcohol, a bulk of them from the poor strata, the fish vendors and daily wage earners who are major buyers of petrol for their two-wheelers and the wannabe rich but perennially poor who keep hopefully setting aside a certain amount every other day to buy lottery tickets. Only then can Kerala claim to have a socialist welfare economy.