Politics of promises hides pro-rich tax rate
Cliches are truths made banal through repetition. The politics of promises, not performance, is the pollen pervading the air in this silly season of cash for votes. There is hardly a party which hasn’t attempted to bribe voters with dosh as dole. However, the cliché of hypocrisy never dies, with each party mocking the other for making promises that cannot be kept.
The Congress jeered Prime Minister Modi’s vow to deposit Rs 500 per month in each farmer’s bank account by questioning the funding sources. Modi found the money, which was distributed while campaigning was on. When Rahul Gandhi followed up with his freebee bomb, the BJP cried foul. His doctrine of wealth with welfare, promising 20 per cent of BPL families a minimum monthly income (NYAY) of Rs 12,000 sent saffronistas into a tailspin.
Expectedly, the ruling party and its motormouth leaders questioned his economics. Stock traders-turned-economists called it a mirage. But the Congress manifesto ignited a meaningful debate and dialogue about the role and capacity of governments to raise welfare funds for the maximum number of Indians rather than assuring prosperity for a few. Congress challenged the BJP to explain how it would find the moolah for farmers’ welfare, health schemes and other handouts outside the Budget. A Congress leader scoffed at the BJP’s ability to raise over Rs 2 lakh crore to recapitalise PSU banks and meet the shortfall of over Rs 80,000 crore in GST collections.
Election 2019 is a sucker’s smoothie that mixes semi-socialism with crony capitalism. Barring a few, while most of the prominent loan defaulters are living in the lap of luxury even after asset-stripping of their companies, the poor are mired in atrocious living conditions. Since the underprivileged turn out in large numbers to vote, they are temporarily the focus of attention. Political leaders are crowdsourcing ideas to market themselves as merchants of prosperity.
Sadly, the present and would-be rulers forget welfare and economy once the votes are cast. Their pre-election idealism and commitment vanishes under the weight of vested interests, and they focus government policies on creating wealth opportunities for the affluent. After many decades, demand creation is now the fulcrum of electoral architecture. India doesn’t need advice from a Nobel laureate to raise resources. Here are a few easy and feasible solutions:
Turnover Tax on Stock Trading: Indian stock markets are responsible for gargantuan income inequalities. Ever since the markets were liberalised in 1991, promoters, bankers, FIIs and speculators have taken avaricious advantage of tax-free capital gains. Script trading has been the most profitable business, using clandestine sources of investment.
The markets are the trading playground of fantabulous frauds. Over Rs 40,000 crore worth of trading happens daily on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). During the past 25 years, none of the Central governments, whether led by the Congress, BJP or the Third Front, had the courage to impose even a token capital gains tax on them. However, for the past few years, both short-term and long-term tax has been levied on income generated through scrip trading. But it is laughably less than the income tax rate for salaried persons.
Powerful domestic and foreign investor lobbies have succeeded in keeping the bourses out of the uniform tax net, which applies to other citizens. Even a 0.10 per cent additional welfare tax on the total monthly turnover of Rs 2.25 lakh crore from securities and stocks trading would yield the sarkar an extra income of Rs 2.60 lakh crore annually. It would cover over 60 per cent of the expenditure to be incurred on Nyay.
This alone will generate enough funds for the farmers’ welfare scheme announced by Modi. Moreover, India is perhaps the only country where the poor and the rich pay equal tax on income from capital gains. In the US, the tax is calculated on the basis of individual income. The Centre would additionally earn Rs 20,000 crore if it prescribes a higher tax on derivatives since it’s a mug’s game where most of the investors are speculators. Previously, restrictions were skimpy, and have been relaxed even more to attract funds from unknown global destinations. The government could consider denying the set-off benefits for losses incurred in derivatives trading.
New India Surcharge on Dollar Billionaires: New India cannot be a reality unless the government massively garners higher revenue through fiscal prudence or forcing the rich to pay a development tax for Bharat. By taking advantage of the liberal tax regime, Indian promoters have amassed huge personal wealth by offloading their equities in companies in which they or their ancestors were promoters. There are hardly a few original promoters left who have majority shareholding in their own corporations. Such a conducive environment has produced a large number of dollar millionaires and billionaires—over a thousand domestic and Indian passport-holding NRI Croesuses with a combined net worth of over $200 billion. Some of them are worth over $5 billion each. Introduce a yearly New India surcharge of 5 per cent on all wealth added to their net worth.
Sin Tax on Luxury Goods: Open markets and liberal import policies have exponentially boosted the consumption of luxury goods and services like foreign supercars, jets, yachts, entertainment equipment, household goods and high-end office or home furnishings by over 1,000 per cent in just a decade. There are more private jets than aircraft owned by all Indian airlines put together. Both import tax and GST on deluxe items should not be less than 30 per cent. A limit must be set on expenses incurred on the use of private jets; and all excess expenditure must be taxed.
Turnover Tax: Indian corporates never lose an opportunity to boast about their burgeoning turnovers. A private study indicates an inverse relationship between turnover growth and the amount paid as corporate tax. As a company grows, it acquires a tendency to evade or save taxes by fudging figures. They take bank loans on the basis of turnover, while their real financials are weak. The government can earn over Rs 40,000 crore yearly by imposing just one per cent turnover tax on companies whose sales exceed Rs 100 crore.
If there is a will, there is always a way. If India adopts a non-discriminatory tax system, enough funds can be raised to sustain a holistic development model. The nation has survived on subsidies for the poor and incentives for the rich. Every election, new slogans mesmerise the impoverished. A fiscal framework that forces the rich to pay for empowering the poor is direly needed. New India will remain just a smart slogan unless parties ensure the equitable distribution of wealth and opportunities.