Go Back   Team-BHP > Around the Corner > Shifting gears


Reply
 
Thread Tools Search this Thread
Old 21st April 2015, 02:13   #16
Senior - BHPian
 
maddy42's Avatar
 
Join Date: Aug 2007
Location: Phoenix, Coorg
Posts: 1,817
Thanked: 426 Times
Infractions: 0/1 (5)
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by drsingh View Post
Taxation on farmers is tricky. Every member of the family 'works' on the farm one way or the other. You're going to treat a whole joint family as an individual and tax their income?

Prices are not market linked and farmers cannot sell their produce without going through a middle man.

The government has given a statement that it cannot /will not set the MSP prices greater than 1.5 times the cost of production.

No true Long term loans available to farmers to build assets or set up alternative farm related businesses.

The 'rich' farmers you come across either have a large hereditary acreage or a windfall by land sale.

Indian Agriculture is a dead end, if something doesn't change.
Plus one to the above para. Few points i would like to add:

"Rich Farmers" or big land holders are few. Atleast for every one rich farmer you would get atleast 100 odd farmers with a hand to mouth existence.

The amount of loans you get for anything other than farming is low. Would need to provide 100% collateral on the same! My education loan was against a 100% FD for the same amount.

Farmers have to go through the middlemen. Farming is a full time job which leaves less time to look for a market for your product. Hope india comes up with a coop concept where the farmers produce can get a good price at the market.

Removal of subsidy on chemical fertilizers would benefit the government but would greatly reduce the productivity on the marginal farmers.

Lastly no Indian farmer parent wants their kids to be farmers. None! Not even the rich farmer.


Government at times works like the mafia. The number of taxes which gets added on any minor item is a pain point. If your doing your taxes yourself then Good Luck. There will surely be something missed which can come up on a audit.

Maddy
maddy42 is offline   Reply With Quote
Old 21st April 2015, 10:13   #17
BHPian
 
hellmet's Avatar
 
Join Date: Oct 2005
Location: GTA
Posts: 810
Thanked: 636 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by GTO View Post
When less than 3% of this country pays income taxes (source), what does one expect? Cars are heavily taxed, so is real estate. Service tax is about to go up soon. Look at the tax component of your food bill at a hotel the next time.

It's unfortunate that more Indians don't come forward & pay their income taxes. Until that changes, expenses will continue to be heavily taxed.
I believe a lot of big businesses and businessmen are getting away with a lot of tax-breaks. There is an urgent need to tax big money - the government's been trying to squeeze the small fish for very long.

The idea that giving tax breaks to a small group of super-wealthy individuals or companies will help create new "jobs" and will let some of this wealth trickle-down has been proven in the West to be false.
hellmet is offline   Reply With Quote
Old 21st April 2015, 12:39   #18
Senior - BHPian
 
alpha1's Avatar
 
Join Date: Apr 2007
Location: P00NA
Posts: 1,613
Thanked: 949 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by hellmet View Post
I believe a lot of big businesses and businessmen are getting away with a lot of tax-breaks. There is an urgent need to tax big money - the government's been trying to squeeze the small fish for very long.

The idea that giving tax breaks to a small group of super-wealthy individuals or companies will help create new "jobs" and will let some of this wealth trickle-down has been proven in the West to be false.
The whole concept of tax breaks is an amusing one since the proponents will give the examples of SEZ leading to "prosperity" and economic growth in regions that were disadvantaged vs the opponent that will highlight the usage of these breaks to fund personal wealth rather than nation's economy.

Quote:
Originally Posted by drsingh View Post
Taxation on farmers is tricky. Every member of the family 'works' on the farm one way or the other. You're going to treat a whole joint family as an individual and tax their income?

Prices are not market linked and farmers cannot sell their produce without going through a middle man.
The government has given a statement that it cannot /will not set the MSP prices greater than 1.5 times the cost of production.
No true Long term loans available to farmers to build assets or set up alternative farm related businesses.
The 'rich' farmers you come across either have a large hereditary acreage or a windfall by land sale.
Indian Agriculture is a dead end, if something doesn't change.
Agriculture everywhere in this world is a dead end. It needs to get less labor intensive. And the labor needs to flow to manufacturing and services sector (which is not exactly the same as labor flowing to urban areas). There is no alternative. Or else we go back to neolithic ages of only agriculture.

Last edited by alpha1 : 21st April 2015 at 12:43.
alpha1 is offline   Reply With Quote
Old 21st April 2015, 13:08   #19
BHPian
 
vrprabhu's Avatar
 
Join Date: Oct 2008
Location: Poona
Posts: 844
Thanked: 329 Times
Default Re: Taxes: How much do we really pay the Government in India?

Good topic - something which is always at the back of my mind.

Here is something which drives the point home..... (a bit long, but worth reading!)

"The Tax System Explained in Gourmet Coffee"
Author Unknown

Every day, ten men go out for Gourmet Coffee and the bill for all ten comes to $100.


If they paid their bill the way we pay our taxes, it would go something like this:-

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the cafe every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily Gourmet Coffee by $20″. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes.

So the first four men were unaffected.

They would still drink for free. But what about the other six men? The paying customers?

How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his Gourmet Coffee.

So, the cafe owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before.

And the first four continued to drink for free.

But, once outside the cafe, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the sixth man.

He pointed to the tenth man, “but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for Gourmet Coffee, so the nine sat down and had their coffee without him.


But when it came time to pay the bill, they discovered something important.

They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works.

The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking coffee overseas, where the atmosphere is somewhat friendlier.

Last edited by Samurai : 21st April 2015 at 18:55. Reason: Rules..
vrprabhu is offline   Reply With Quote
Old 21st April 2015, 14:04   #20
BHPian
 
Guite's Avatar
 
Join Date: Jul 2008
Location: Noida, NCR
Posts: 463
Thanked: 171 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by vrprabhu View Post
Good topic - something which is always at the back of my mind.

Here is something which drives the point home..... (a bit long, but worth reading!)
That's an excellent analogy. I hope your post does not get deleted. Else you an repost by replacing the drink with tea or coffee and it would still work.
Guite is offline   Reply With Quote
Old 21st April 2015, 18:41   #21
BHPian
 
drsingh's Avatar
 
Join Date: Mar 2011
Location: Ludhiana
Posts: 662
Thanked: 444 Times
Default

Quote:
Originally Posted by Simhi View Post
Interesting thread - my two cents - remove taxes targeting certain section of people like salaried (bulk of 3%) and introduce or increases taxes which everyone needs to pay, like service tax and include more services in the net. This would ensure all people politicians, business men, farmers etc pay tax indirectly for example eating in a hotel.
That's exactly what's happening. Service tax is 14 % now instead of 10. Something a couple years back. And even healthcare comes under this net now.

I recently studied an electricity bill of Rs. 4600 (3860 before taxes) . That comes to about 15-16 % tax and about 7.5 per unit cost (650 units approx.) which is actually higher than commercial bills. And I'm sure they get to write off electricity bills as expenses.

The bill would be lower if it was billed monthly instead of bimonthly as first 200 units are charged less.

Just something I observed today. I wonder what everybody else pays for electricity and if this bimonthly billing is SOP all over?

Last edited by drsingh : 21st April 2015 at 18:58.
drsingh is offline   Reply With Quote
Old 21st April 2015, 18:42   #22
Senior - BHPian
 
alpha1's Avatar
 
Join Date: Apr 2007
Location: P00NA
Posts: 1,613
Thanked: 949 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by vrprabhu View Post

But when it came time to pay the bill, they discovered something important.

They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works.

The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
Very succinctly put across.
Somehow I feel there is a big role of religion in demonizing money, rich folks, markets, capitalism. Whereas absence of these will only lead to everyone becoming poorer and less well off and greater corruption and lesser transparency than before as experienced in many Marxist countries.

No one looks at the risk taking ability, ingenuity, persistence, and the ability to bring together resources like money, people, technology in order to get to that place.
alpha1 is offline   Reply With Quote
Old 22nd April 2015, 01:06   #23
Team-BHP Support
 
Samurai's Avatar
 
Join Date: Jan 2005
Location: B'lore-Manipal
Posts: 22,042
Thanked: 13,490 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by vrprabhu View Post
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
Ah, the most popular parable in the Republican or Tea-party circles.

Except, there is one glaring problem here. This parable assumes that every one is enjoying the same quality gourmet coffee in the same nice cafe. That's like saying top industrialists and slum dwellers are enjoying same life style.

There is nothing wrong in rich people paying more tax than poor people. It helps alleviate the income gap. Most people in IT pay more in tax than the entire combined income of drivers, maids & cooks who work for them. Who enjoys better life style? Most of those who do the menial jobs at offices and homes weren't fortunate enough to get the education and career guidance, or simply fell into hard times due to circumstances beyond their control. Don't grudge their tax-exempt status, they are not drinking the same gourmet coffee as you.

Quote:
Originally Posted by alpha1 View Post
No one looks at the risk taking ability, ingenuity, persistence, and the ability to bring together resources like money, people, technology in order to get to that place.
Then you should be okay with 100% estate tax, no? Why should some people just inherit when their parents earned it via risk taking ability, ingenuity, persistence, and the ability to bring together resources like money, people, technology in order to get to that place.

Last edited by Samurai : 22nd April 2015 at 01:10.
Samurai is offline   Reply With Quote
Old 22nd April 2015, 10:18   #24
BHPian
 
vrprabhu's Avatar
 
Join Date: Oct 2008
Location: Poona
Posts: 844
Thanked: 329 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by Guite View Post
That's an excellent analogy. I hope your post does not get deleted. Else you an repost by replacing the drink with tea or coffee and it would still work.
Samurai did a good turn there - forgot the posting rules in my enthusiasm to reply


Quote:
Originally Posted by Samurai View Post
Ah, the most popular parable in the Republican or Tea-party circles.

Except, there is one glaring problem here. This parable assumes that every one is enjoying the same quality gourmet coffee in the same nice cafe. That's like saying top industrialists and slum dwellers are enjoying same life style.
Thanks for the edit.

Yes - your point is right. The lifestyles differs drastically across the section of our society (there was a hungama couple of months back in Pune when McD refused to serve a street urchin) - but it was just to deliver the point that the rich do pay more taxes and appear to be easier targets.

However, service tax doesn't discriminate - whether the recipient of service is rich or poor, the tax rate is same!



Quote:
Originally Posted by drsingh View Post
That's exactly what's happening. Service tax is 14 % now instead of 10. Something a couple years back. And even healthcare comes under this net now.
As of now service tax is still at 12.36% till the changes in the rate proposed in the Finance Bill is moved into an Act.

But, you are right - all services have been brought under Service Tax, which includes insurance premium also!!
vrprabhu is offline   Reply With Quote
Old 22nd April 2015, 11:57   #25
Senior - BHPian
 
alpha1's Avatar
 
Join Date: Apr 2007
Location: P00NA
Posts: 1,613
Thanked: 949 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by Samurai View Post
ost of those who do the menial jobs at offices and homes weren't fortunate enough to get the education and career guidance, or simply fell into hard times due to circumstances beyond their control. Don't grudge their tax-exempt status, they are not drinking the same gourmet coffee as you.
Come on, his post was about tax breaks, and the illogical way public may look at it. His post does display a progressively higher tax for the rich.

Quote:
Then you should be okay with 100% estate tax, no? Why should some people just inherit when their parents earned it via risk taking ability, ingenuity, persistence, and the ability to bring together resources like money, people, technology in order to get to that place.
For that we will have to go to the part about why the parent took such great pains and effort to make huge monies.
The answer to that will determine whether 100% estate/inheritance tax is justified or not.
Another question would be what if the rich parent decides to leave all his fortune to a poor beggar instead of his children?
What about the tax in this case?

Last edited by alpha1 : 22nd April 2015 at 11:59.
alpha1 is offline   Reply With Quote
Old 22nd April 2015, 12:37   #26
Senior - BHPian
 
sdp1975's Avatar
 
Join Date: Aug 2009
Location: Bangalore
Posts: 1,573
Thanked: 879 Times
Default Re: Taxes: How much do we really pay the Government in India?

Service tax rates have gone up from 5% from 1994 to an appalling 14% now. I really cringe when I look at my restaurant bill , or my car service bill. The ambit of services have gone up over the years, and I'm not talking of the cess applied on ST. Any increase in ST will hamper the growth of the service industry and employment opportunities, etc.

There's also another aspect - the corruption aspect . Many service providers collect ST and don't remit it to the government. The government recently announced an amnesty scheme for these folks to pay up - just because the govt didn't have the manpower to follow up with all cases . I think hardly anyone did.
sdp1975 is offline   Reply With Quote
Old 23rd April 2015, 19:50   #27
BHPian
 
Join Date: Jun 2011
Location: Chennai
Posts: 130
Thanked: 59 Times
Default Re: Taxes: How much do we really pay the Government in India?

I am not an economist and the least I understand is economics. However, one of the fantastic article I have come across. Read it though it's long.

This was a post which circulated in my circles in FB and I am copy/ pasting it here (I hope, I am not breaking the rules of our community in doing so, if so, kindly delete it).

Mr.Arun Bokil , one of the key member of Arthakranti Sansthan was given time to share to PM Modi before recent election. He was given 9min for sharing but Mr Modi heard him for 2 hrs.

Arthakranti Proposal - What is Arthakranti Proposal and who has given the proposal?
“Arthakranti Proposal” has been given by a Pune (Maharashtra) based “Arthakranti Sansthan” which is an Economic Advisory body constituted by a group of Chartered Accountants and Engineers. This funda has been patented by the Sansthan.

Arthakranti Proposal is an effective and guaranteed solution of Black Money Generation, Price rise and Inflation, Corruption, Fiscal Deficit, Unemployment, Ransom, GDP and industrial growth, terrorism and good governance.

What is in the Proposal ?
“Arthakranti Proposal has FIVE point of actions simultaneously.
  1. Scrap all 56 Taxes including income tax excluding import duty.
  2. Recall and scrap high denomination currencies of 1000, 500 and 100 rupees.
  3. All high value transaction to be made only through banking system like cheque, DD, online and electronic.
  4. Fix limit of cash transaction and no taxing on cash transaction.
  5. For Govt. revenue collection introduce single point tax system through banking system – Banking Transaction Tax (2% to 0.7%) on only Credit Amount
Important Points to note:
  1. As on today total banking transaction is more than 2.7 lakh crores per day say more than 800 lakh crores annually.
  2. Less than 20% transaction is made through banking system as on today and more than 80% transaction made in cash only, which is not traceable.
  3. When 78% of Indian population spend less than 20/- rupees daily, why the need of 1000/- rupee note?
What will happen if All FIFTY SIX Taxes including income tax scrapped :
  1. Salaried people will bring home more money which will increase purchasing power of the family.
  2. All commodities including Petrol, Diesel, FMCG will become cheaper by 35% to 52%.
  3. No question of Tax evasion, so no black money generation.
  4. Business sector will get boosted. So self employment.
What will happen if 1000/ 500/ 100 Rupees currency notes recalled and scrapped :
  1. Corruption through cash will be stopped 100%.
  2. Black money will be either converted to white or will vanish as billions of 1000/ 500/ 100 currency notes hidden in bags without use will become simple pieces of papers.
  3. Unaccounted hidden huge cash is skyrocketing the prices of properties, land, houses, jewellery etc. and hard earned money is loosing its value; this trend will stop immediately.
  4. Kidnapping and ransom, “Supari killing” will stop.
  5. Terrorism supported by cash transaction will stop.
  6. Cannot buy high value property in cash showing very less registry prices.
  7. Circulation of “Fake Currency” will stop because fake currency printing for less value notes will not be viable.
What will happen when Banking Transaction Tax (2% to 0.7%) is implemented :
  1. As on today if BTT is implemented govt can fetch 800 x 2% = 16 lakh crore where as current taxing system is generating less than 14 lakh crore revenue.
  2. When 50% of total transaction will be covered by BTT sizing 2000 to 2500 lakh crores, Govt will need to fix BTT as low as 1% to 0.7% and this will boost again banking transaction many fold.
  3. No separate machinery like income tax department will be needed and tax amount will directly deposited in State/ Central/ District administration account immediately.
  4. As transaction tax amount will be very less, public will prefer it instead paying huge amount against directly/ indirectly FIFTY SIX taxes.
  5. There will be no tax evasion and govt will get huge revenue for development and employment generation.
  6. For any special revenue for special projects, govt can slightly raise BTT say from 1% to 1.2% and this 0.2% increase will generate 4,00,000 crores additional fund.
Effect of if implemented today :
  1. Prices of all things will come down.
  2. Salaried people will get more cash in hand.
  3. Purchasing power of Society will increase.
  4. Demand will boost, so will production and industrialisation and ultimately more employment opportunity for youth.
  5. Surplus revenue to the govt for effective health/ education/ infrastructure/ security/ social works.
  6. Cheaper and easy loans from banks, interest rate will come down.
  7. Tendency of society will changes from scarcity to quantity.
  8. Spare money for political system for clean politics,
  9. Prices of land/ property will come down,
  10. No need to export beef to cover up trade deficit
  11. Sufficient fund for research and development.
  12. Society will be free from “Bad elements”.
Jakku is offline   Reply With Quote
Old 25th April 2015, 17:43   #28
Newbie
 
Join Date: Aug 2004
Location: Bangalore
Posts: 24
Thanked: 0 Times
Default Re: Taxes: How much do we really pay the Government in India?

Had a weird idea in my mind for some time now.
instead of taxing multiple times, have a system which will provide tax benefits to the people.
For example: if I am to pay an income tax of 1 lakhs, attribute all the taxes (Sales, service etc) I paid towards my PAN number and treat it as a credit to my pan account. At the end of each taxation year I just need to pay the balance that is required on my account.
this will enable all the consumers to demand proper receipts and government will get what is due.
seby_v is offline   Reply With Quote
Old 27th April 2015, 00:32   #29
BHPian
 
Join Date: Oct 2011
Location: mumbai
Posts: 450
Thanked: 181 Times
Default Re: Taxes: How much do we really pay the Government in India?

Vrprabhu
Hi.
I have been paying service tax to HDFC on life insurance premium.
AFAIR LIC was exempted whereas the private insurers were to pay. They add to the premium.
Somebody please correct me if I am wrong.

Drsingh
Hi
In Bombay BEST charges us on a monthly basis. Every conceivable tax is levied including fuel surcharge. The higher no of units you consume the per unit charge goes up.
Regards
faustus77 is offline   Reply With Quote
Old 27th April 2015, 10:32   #30
BHPian
 
vrprabhu's Avatar
 
Join Date: Oct 2008
Location: Poona
Posts: 844
Thanked: 329 Times
Default Re: Taxes: How much do we really pay the Government in India?

Quote:
Originally Posted by Jakku View Post
What will happen if 1000/ 500/ 100 Rupees currency notes recalled and scrapped

Fix limit of cash transaction and no taxing on cash transaction.

What will happen when Banking Transaction Tax (2% to 0.7%) is implemented :

No separate machinery like income tax department will be needed and tax amount will directly deposited in State/ Central/ District administration account immediately
Who knows? May be all the things you have stated may happen - which could be a reason why nobody is interested in recalling high value denominations (in the US, the highest denomination is US$ 100 - they stopped printing high value notes 50 years ago). Finally, the interested parties in our country may even invent their own form of cash (a la bitcoin?) if high value notes are discontinued......

Anyway, Finance Minister Chidambaram did try out a version of this tax - called BCTT - Banking Cash Transaction Tax. This was imposed on cash deposits in a Bank Account above a threshold limit. Fortunately it was withdrawn. What they should have tried to do was to tax the withdrawals and not the deposits, if they want to discourage the use of cash....

Quote:
Originally Posted by faustus77 View Post
I have been paying service tax to HDFC on life insurance premium.
AFAIR LIC was exempted whereas the private insurers were to pay. They add to the premium.
There were some changes made in 2014 wrt Service Tax on insurance premium (earlier ULIPs were within the ambit of Service Tax). Further, I recall that LIC was paying the service tax from its pocket, and there was proposal to pass it on to the customers after 2014 ( between 3% and 1.5% or something like that). BTW, the premium receipts which is given all contain the service tax registration number of LIC printed prominently....
vrprabhu is offline   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
How much do you pay for your broadband? Rtech Shifting gears 892 14th August 2017 22:27
CBU registration charges and taxes: How much did you pay? sarmarishi The Indian Car Scene 5 9th April 2015 02:42
Toll Taxes: Are they really justified? varun.ppl The Indian Car Scene 23 12th June 2008 19:59
How much to pay for 02/03 WagonR/Santro zaphod Shifting gears 6 3rd April 2005 15:58


All times are GMT +5.5. The time now is 08:31.

Copyright ©2000 - 2017, Team-BHP.com
Proudly powered by E2E Networks