Government Exacts but Fails to Deliver

Published: 12th October 2014 06:01 AM  |   Last Updated: 12th October 2014 06:01 AM   |  A+A-


KOZHIKODE: Kerala leads the South Indian states in terms of rates of taxation. Surprised? The figures speak for themselves: The state government charges five per cent VAT on gold jewellery while most other states have one per cent. For liquor, it is 135 pc in the state while in Tamil Nadu it is just 58 pc. Kerala charges 5 pc for edible oil, it is one per cent in Karnataka. The rate of vehicle tax in Kerala is 12 pc while in Tamil Nadu it is 8 pc and 10 pc for motorcycles and four wheelers respectively. No other state has imposed a turnover tax of 2 pc on textiles. What’s strange is that despite the high rate of taxation, the state has poor  infrastructure facilities, including bad roads. The recent hike in tax rates by the state government to tide over the economic crunch has kickstarted a debate among the business fraternity that though the government is ripping apart the public, it fails to deliver.

 ‘‘Compared to S Indian states, tax rates are higher in Kerala. But it has poor infrastructure facilities. While people here suffer badly due to narrow roads, there is huge progress in construction of roads and flyovers in the neighbouring states,’’ said Ashik Parol, president, Kerala Chamber of Commerce and Industry (KCCI)- northern region.

Not only commercial taxes, Parol said: ‘’There are significant differences in water tariff, building tax rates, bus fare and the like. While Kerala charges 80 paise per sqft as building tax, it is 60 paise in Andhra Pradesh and Karnataka. If the only plan is to slap more and more tax burdens on the public, the government will have to pay a heavy price for it.’’  All Kerala Consumer Goods Distributors Association president C E Chakkunny said states like Tamil Nadu and West Bengal have recorded a three-fold growth in tax revenue even without hiking tax rates over the last three years. ‘’Due to skyrocketing prices, turnover of traders and industrialists increased and, hence,there was an increase in tax revenue as well. However, in Kerala, despite the high rate of taxes, revenue is declining. While a majority of the essential commodities are taxed at the rate of 14.5 per cent in Kerala, it is only five per cent in the  neighbouring states,’’ said Chakkunny who was part of a team which had recently conducted a study into the tax structure in other states.

Former Finance Minister T M Thomas Isaac, however, begs to differ. ‘’I accept that there are issues of misclassification of VAT when compared to other states. Lack of uniformity in tax rates with neighbouring states is creating issues. But, I cannot agree with the argument that tax rates are extremely higher in Kerala,’’ he said. 

According to him, such kind of discussions are emerging among the business community as the latter is in confrontation with the ruling front. ‘’It is a fact that the Finance Department is now harassing the traders a lot in the wake of the economic crunch,’’ he said.

Discounting the allegations, State Planning Board member C P John said the overall development of the state should be considered instead of evaluating the growth of cities. “Compare the rural regions and the neighbouring states and see the difference. Rural folks have better roads and access to basic facilities than other states,” he said. (to be concluded)

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