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Karniti Part-44: “Why one who pays tax only suffers?”

Arjuna (Fictional Character): Krishna, currently everywhere discussions are going on about the upcoming Budget. But Krishna, most of the taxpayers feel that the tax burden should be minimized or removed. They feel “One who pays tax only suffers and others who don’t pay enjoys”. While managing the financial affairs in life, why the taxpayer feels unhappy at the time of paying tax?  There is a wide disparity, Government wants to levy taxes to earn revenue but people do not want to pay taxes. How to find a way out of this in Budget?

Krishna (Fictional Character): Arjuna, Govt. collets taxes and utilizes it for citizen’s security, development, growth, etc. See, like in sports, one wins while other loses similarly in life one’s grief is others reason for happiness. In same way, an expense of one is an Income of other, and hence disparity between Government and Taxpayers will always remain.

Arjuna: Krishna, Please tell some major reasons for the belief “one who pays tax only suffers” develops?

Krishna: Arjuna, some major reasons for this belief are as under:

1. Lesser % of Taxpayer in Population of India: India is an agricultural country. Approximately out of total population of 125 crores, 70% are engaged in agricultural activities. However, tax cannot be levied on agricultural income, due to which those having income from other sources have to pay taxes. Approximately out of the balance 30% of the population i.e. 38 crores, only 3 crore people pay Income tax. Hence, when these minority taxpayers compare their financial status with non-taxpayers citizens, they develop above belief.

2. Non availability of information about new taxpayers: The Budget contains information about tax collections made during the year, but there is no comparative information available of number of new and old taxpayers and taxes paid by them. Hence Old taxpayers feel that, only taxes are collected from them and others are not contributing to growth. That’s why the belief that “one who pays tax only suffers” develops.

3. Stringent tax laws and hostile treatment by Tax authorities: All taxation departments are strictly inspecting taxpayers who are paying tax. Due to this, same treatment is not received by everyone and those who pay tax feel that the taxation system is burdensome and erroneous. The treatment given to patient is more taxing then taste of medicine, same is the case with taxpayers. Many multinational taxpayers feel that “Tax Terrorism” had started in India due to retrospective amendments in tax laws. Different tax laws required different compliances and increases complexity to do business. Tax payers hope that Proposed DTC and GST may simplify the tax laws.

4. Increase in Cost of Justice and delay in it: When wrong/erroneous tax is levied, taxpayer has to go in appeal. The cost of appeal is nowadays high due to denial of Stays and other issues. Further time period is lost to get the justice. Hence many tax payers avoid going into litigation even though they are correct. Thus the belief as mentioned above increases. The speedy justice to the cases may reduce this.

5. Relief schemes to tax defaulters and “Babaji ka thullu” to tax compliers: The Government provides amnesty schemes to tax defaulters and gives relief from penalties and fines. Recently Service tax amnesty scheme is the best example. Due to this, the tax compliers feel that tax defaulters are rewarded and relieved now and then.

6. Deviation in object of tax collection later on: Every tax is levied with specific object or reason. Taxpayer pays taxes to full fill that objective. However even after attaining the objectives government continues to levy taxes, which is incorrect. For e.g. Toll taxes were collected for recovering expenses of construction and maintenance of roads, however even after recovering the amount, collection of toll taxes continues. Many taxes are levied in this fashion and there is deviation in object of levying tax and collection of it.

7. Corruption percentage and spending of Govt. on different Schemes: Many businessmen know the percentage of corruption in many Govt. departments. This has created an impression that no work is done without it. Till Today, Government has started many schemes and arranged for its finance by way of taxes in the Budget. But in reality the benefit of these schemes reach to very few people. Taxpayer’s money is not utilized for development purposes properly. For e.g. the benefit of Rs.100 is reduced to Rs.10 when it reaches the ultimate beneficiary. Even former Prime Minister has expressed above feeling and was concern about it.

Arjuna: Krishna, what one should learn from this belief of “one who pays tax only suffers”.

Krishna: Arjuna, It is extremely necessary to change this belief, actually it is misbelief. For this, the Government will have to take concrete steps in upcoming Budget. If a taxpayer evades tax, he should be penalized, but the Government makes update in law with the mentality that an offence done by one person is done by all. Also, there are no incentive schemes for taxpayers paying tax correctly and regularly. Like in School, studies student is rewarded, thus other students feel motivated. In same way it should be done for regular tax payers. Further tax authorities should also note that they are also tax payers.  A tax payer should note that in life, to do good deeds lot of efforts are required that’s way pay taxes for the development of country in spite of issues. Rather than discussing problems in life, one should always try to overcome it and move ahead. Hope “Good days will come down in life of Tax payers”. But worth to note that happiness is state of mind.

Dear CAClubindia lovers, your comment please, as they are very valuable and precious.


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CA Umesh Sharma
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