Taking more taxes from the rich won?t plug the leaks in govt?s social spending
In the US context, Jeffrey D Sachs, special advisor to the UN Secretary General on Millennium Development Goals, bewails ?the premeditated asphyxiation of the state?. Against ?dangerous cuts in public goods and services?, he advocates the higher taxation seen in many European countries because of benefits like ?higher reported life satisfaction and greater macroeconomic stability?. How he could have been making such claims about Europe as recently as this August is a great mystery. But we will have to leave it aside for the moment, because Sachs is now giving similar tax advice to India! Rich Indians should pay more taxes than they do, then government should use these monies to increase social spending to address problems like malnutrition and poverty, Sachs admonishes. He can do with a short history lesson.
India has already experimented with a high taxation regime in the Indira Gandhi years, and its scars haven?t healed yet. Years of pathetic growth didn?t take a fleeting toll. Tax collections didn?t surge again till lower taxes returned. And if we were to resuscitate that ogre again, the rich will simply move elsewhere, taking the industries they set up with them. What is needed, however, is the cleaning up of tax exemptions that amount to a high 59% of total tax collections. As for Sachs?s admonition to corporates to do more to meet MDGs, that?s really the government?s responsibility. If corporates participate, they must be allowed to make profit simultaneously. Still, discordant Sachs will be music to the ears of those who (misguidedly) champion mandatory 2% corporate spending on CSR.
