Monday, February 28, 2005

Taxing times

The media is terribly unfair to our politicians at this time of the year.

I've been listening to, and reading, commentaries and analysis for the last two days, and I just can't figure out what they want.

Laloo Yadav comes up with a decent rail budget that does not burden the ordinary rail passenger any further and they dismiss his budget as 'populist.'

What, anyway, is so wrong with being populist'?
A minister who is taking 'populist' measures is simply giving the people what they want. Right?
A minister has been given the power to take these measures by people who believe that he/she will take decisions based on what they want. Right?

A minister has no business taking economic decisions that affect the lives of a hundred crore people, if he/she does not have public sanction. Budget, therefore, have to be populist.

I, for one, don't swallow that claptrap about taking 'harsh decisions that are necessary... even if it meets with public opposition, at this point of time.' It smacks of authoritarianism.

It's like saying - "The people of this country are idiots. They don't know what's good for them. We'll have to give them a few bitter pills (which may be sugar-coated, lest they resort to open rebellion, in protest) but once swallowed, these bitter pills will be good for the national economy's health..."

Which is a very stupid line of reasoning. They don't know better. No one knows my needs better than I do.

I travel in trains and I know I don't need fare hikes. And oh, I would like air travel to become much, much cheaper. I don't mind competition in that segment. If, by allowing FDI, or by relaxing norms so entrepreneurs are encouraged to set up more indigenous airlines, air-fares can be brought down, I want the government to make that sort of decision.

I don't want cooking gas to be more expensive. I don't care much if petrol prices are hiked. If you can afford a car, you can afford the fuel. If you can't, switch to public transport, or bicylces. Good for health, too. Or car-pool.

On the other hand, it does bother me a little if deisel prices go up. Most tractors and other farm equipment needs deisel. Farmers will either have to bear the brunt, or will pass on the cost to the end-customer (highly unlikely, in this country). Food - and the processes involved in producing and distributing it - should never be expensive.

I rather like Chidambaram for his budget - at least, as much of it as I've heard so far, and can understand the relevance of. I like the fact that he's made tax exemptions for those make less than Rs 1 lakh p.a., and especial concessions for women and senior citizens.

I like the fact that he's imposed a small cess on those who withdraw more than Rs 10,000 from an ATM (at least, that's what I gathered from the annoucnement) in a day. If you're the kind of guy who withdraws that kind of money on a daily basis, you can surely afford a couple of bucks as cess.

In fact, I think all the big malls and five/seven-star hotels should have a built-in tax. You pay ten percent extra on all goods that you buy anywhere that's glass-fronted.

Tax the cigarette-gutka guys. Tax the liquor guys. Tax the luxury car guys. Tax all who can afford it, I say. For now, PC, hum tumhare saath hain.


Dilip D'Souza said...

Yo Annie, thanks for standing up and saying something favourable about Lalu. He would have been bashed regardless of what that budget contained. So I'm glad you defended that much-maligned word, "populist".

Anonymous said...

Whats the use of a budget.. where the government promises 100 things, and only 1 or 2 of the promises are taken care of !

The same Lalu had proposed 17 new trains in the prev budget, but only 4 of them have been started so far.

This year 46 new trains have been announced !! Sounds great. But what is the ground reality ?

Where is the money going ?
Not in my pocket, .. nor Urs!

The same is the case with the union budget. You give from one end, and take more from the other end. And that too from a common man. From people who *cannot* afford to!

The withdrawal tax for ex.. is one of the stupidest idea's i have ever come across. Its not about "how much" is taxed... its about ethics. (btw, this amount is quite huge.. comes to around 500 crs from urban areas alone!) It would create major problems for every one in this country.

You are basically paying tax for your tax paid money!...

Janaki said...

What's a populist budget? Again it is a perception.. what some people some where think the masses should not be subjected to..

Dont know nitty gritty details of any of the two budgets u spoke about... but putting a ten buck on every ten thou (even if u withdraw from a bank branch) will not ensure less of black money (what it is supposed to) but increase hassles for u (yes there will be times u will need to withdraw that much and u mafren do come under the so called "middle class") plus u are paying an additional tax on something that in all probability has been taxed!

But gut feel is that either this measure will be rollbacked (or ceiling raised). It smacks of being a measure annouced just to be rollbacked a few weeks from now (as is traditional with most budgets)

Anonymous said...

The Rs 10,000 tax will hit every business that employs labour that has to be paid in cash - eg, tea-gardens, dhabas, transporters, municipal corporations, port labour, etc. It isn't just an ATM-based measure - anybody who withdraws 10,000 / day from a bank pays the tax.

Since that's most labour-intensive businesses, this tax is a disincentive to employ people. It won't really affect the big individual spender at all. Less than 200 million Indians have bank accounts - I'm sure you can figure out approximately how many need to be paid in cash. Do you still think it's a good measure?

The railway passenger fares are kept low by keeping freight charges very high. And, as a result, the railways doesn't have cash to modernise tracks and signal systems thus increasing punctuality and reducing accident rates.

Would you rather pay less everyday for the things you eat and buy and more once every once in a while for the rail journeys you take? Especially if the journeys were more likely to be both punctual and safer?
Or would you rather it was the other way around as indeed, it is in practice?

The actual difference in refining cost between diesel and petrol is approx 1.40 per litre. By artificially raising the price of petrol through a discriminatory excise policy, the indian government encourages the use of a fuel which is more than twice as polluting and inefficient.

Would you rather have a cleaner environment and lower healthcare bills allround or would you rather encourage people to use a more polluting fuel?

Economic measures frequently have counter-intuitive outcomes. "Populist" is the euphemism academics use for measures where the population at large is unlikely to figure out the real outcome. Yes academics are stupid in their circumlocutions but so, usually, are populist measures.

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