Is India the most over-taxed country of the contemporary world? If one adds up all the taxes paid by the tiny fraction of the upper and middle classes (only 14.6 million citizens earn over Rs.5 lakh per year) obliged to pay income tax, it is arguable that India is the world’s most over-taxed nation.
For instance, on a modest salary of Rs.12 lakh per year, citizens are obliged to pay Rs.4 lakh as income tax to the Central government. Moreover, a plethora of indirect taxes are levied — excise on most manufactured goods, GST (general sales tax) and service tax on a range of services including food and drink in restaurants. In addition, property tax is due to the state government by home owners, and heavy registration, petrol/diesel and road taxes are payable by car and automotive two-wheeler owners.
To this list of official taxes, one must add parallel taxes, i.e, bribes and inducements to the country’s 18 million government employees to deliver any and every public service or conduct of ordinary business. Nor is that all. Then one must also add sums doled out to destitute citizens as alms and charity.
In all civilised societies, the social contract is that in return for paying taxes, citizens are provided public goods and services. Yet the plain truth is that most government provided goods and services are so pathetic that self-respecting citizens tend to avoid them, and hesitate mightily to step into a police station or court of justice. So where does all the tax revenue go? In the next Union Budget to be presented shortly, please note that government establishment expenses (salaries, rents, perquisites including swanning about in ministerial jets, elaborate car convoys and foreign jaunts) consume 25 percent of the Union budget. Ditto state governments. That’s where.