The SENSEX reached 35000 points on 17th Jan 2018 after the Government announced that it is cutting the additional borrowing planned to 20K crores from 50K crores as tax collections improved. There were two positives in this news, and the bulls partied to take the SENSEX past another new peak.
When borrowing is less, it brings down the deficit in the fiscal expenditure and gives us the signal that the economy is getting stronger. Along with this, the second good news is that tax collections improved.
We have had budget deficits since time immemorial, and most of the time, the shortfall is made good by selling public sector companies. In FY18, we planned to sell 72K crore, and for FY19, the disinvestment target is set at 90K crores. If we keep selling like this and spending the money to meet the shortfall in the budget, at some time the sources will be exhausted. When that happens, from where can the Government get money to meet expenses?
Will we reduce expenses?
Like it is said for individuals, “live within your means.” We are a growing nation and have a lot of development that needs to be looked into pretty soon. Tax paying should become a solemn responsibility of the citizens, not just as a legally regulated mechanism but also as a cultural norm. The idea that we can piggyback on taxes paid by some citizens is wrong and contributes nothing to the economy in the long run.
Thus, when tax collection improves, it is a sign that income is coming from a source which need not be paid back like borrowings or that one need not part with some asset like selling PSUs. If the collection has improved because of people becoming more responsible towards the nation building, it is an excellent sign of progress.
Instead, if it was forced on the people, we should appreciate the government for having thought differently to get something different from people who are hell bent on not paying taxes.
If people become responsible, nothing can be a better change than that because the whole nation can go through a phenomenal growth phase which will benefit every citizen. Today, our tax paying population is only 1.97%. This means that even if we take out children along with retired people at 50% of our population & unemployed people at 20% of the population, nearly 28% of earning people in our country is not paying tax. But they are enjoying all the benefits like roads, power, buses, railways, parks and all other public services.
In a way, it can be said that the 1.97% is feeding these irresponsible citizens. The greater irony is that these non-payers justify their actions and boast about paying taxes but are first in line to complain about the lack of civic amenities. Can less than 2% of the population ever pay enough tax to feed the rest of the people? In reality, tax evasion is akin to begging and living at the mercy of the elite 1.97% population.
As the tiny percentage of taxpayers slowly begins to grow, either through their willingness or government force and the balance tilts the other way, people themselves can self-police and bring the evaders to task. This condition is soon to happen in India.