The Canadian Parvasi - Issue 102

The International News Weekly INDIA
July 12, 2019 | Toronto 10
Why high income tax rates
are so unjust in India
Govt Pointed To Other High-Tax Nations To Justify Levy On Super Rich, But It Hardly Matches Up To Them On Social Welfare Coverage
New Delhi : It’s true,
there are countries where
the super rich pay even
higher taxes than they
do in India. The government
used this to justify
the higher taxes that those
earning above Rs 2 crore
will now have to pay. But
there was something it did
not mention: most hightax
countries invest heavily
to finance free education
and healthcare along
with various social security
schemes. That doesn’t
quite hold true for India.
Global experience suggests
that among the most
effective affirmative actions
that alleviate poverty
and bring equality are universal
access to affordable
health and education. India
fails miserably on both
counts.
According to a 2018
UK government report, of
the total 87.4 lakh primary
and secondary students
enrolled in the country,
91.3% were studying in
government schools. For
the same year, US government
estimated that 89.6%
of the total 5.7 crore school
students in the country
were enrolled in public
schools. World Bank data
shows that in 2016, enrolment
in private schools at
the primary level was 15%
in France and 9% in Canada.
This was 33% in India.
At the secondary level, 25%
of French students were
enrolled in private schools
while this was 8% in Canada.
In India, this was 51%.
And the only reason this is
so is because there aren’t
enough good government
schools in India. As a result,
the taxpayer is not
only paying taxes, but also
paying large sums for her
child’s education.
Now consider health.
In 2016, 64.6% of all our
health expenditure was
borne by Indian citizens —
in other words, this was an
out-ofpocket expenditure.
This was less than 15% for
Canada, US and France. A
2011 WHO estimate shows
that more than 5 crore Indians
were pushed below the
$1.90-PPP a day (international
poverty line) because
of health expenditure.
“Education and health
are state subjects and
many of the tax hikes are
imposed through cess and
surcharge, which are not
shared with the states.
Given the weak notion of
social contract between
the state and citizens in
India, it is necessary that
it is visible to citizens that
revenue mobilised is going
to the right causes,”
said Malini Chakravarty
of CGBA. “There is a huge
centralisation of tax revenue
and, unlike many
other countries, our states
don’t have similar freedom
to increase their tax revenue,
especially after GST
came in,” she added. “By
making outcome of outlays
more accountable, public
sector delivery can be vastly
improved,” said NR Bhanumurthy
of NIPFP. “With
today’s digital tech, we can
have a far better assessment
by tracking the flow
of information, like in the
case of direct benefit transfer,”
he added.
World Bank data shows
that the Indian government’s
spend on education
as a proportion of GDP is
much lower than many
high-tax countries. “The
low spend on healthcare
and education can partly
be attributed to India’s
low tax-GDP ratio,” says
Anurag Behar, CEO, Azim
Premji Foundation. “To up
welfare spending, India has
to widen its tax base, but
there are many structural
problems — bulk of workforce
is in unorganised sector,
which remains excluded
from tax base, and justly
so,” he said.
World Bank data shows
that India’s central government
tax-GDP ratio
of 11.2% is far lower than
countries like France and
UK, where it is above 20%.
“The lack of money for government
to finance education
led to rapid for-profit
privatisation of the sector,
which is not desirable and
has led to inequity and
poor quality,” Behar added.
“Developed countries
experimented with market
oriented neo-liberal
policies when they were
already at a much higher
level of development. That
wasn’t the case with India
when neoliberal policies
were introduced,” said
Chakravarty. Since neoliberal
policies inevitably
require keeping fiscal
deficit in check, spending
on social sectors becomes
the first casualty when adequate
revenue is not generated,
she added.