Unsearched Dimensions of Taxation in India: Taxpayer Behavior, Curiosities about Taxes, and Gig Economy Taxation
Taxation is always viewed as an unwelcome imposition- a pain that one does not wish to put themselves in. But what makes so many people unwilling to pay taxes, even when they understand how crucial it is? Or what about the infamous strange taxes that India, and in particular, its politicians have imposed? Moreover, do social media influencers and YouTubers actually pay taxes in this modern age? These are some aspects of taxation in India that require a closer look.
The Psychology of Taxpayers: What Motivates Tax Evasion?
For nearly everyone, just the utterance of the word ‘taxes’ induces a sense of unease. But what causes this? The answer is found in the human psyche.
1. Preconception That Everything is Unfair
A good number of people tend to think that the funds they receive after tax are put to good use. They have heard of various cases involving corruption and public funds being squandered with no real changes in development or service delivery. They feel taxes are mandatory levies that have no positive expectations in return. If the public felt that their taxes made a tangible difference, submissions would rise.
2. Fear and Lack of Information
Even though the tax structures has been demystified over the years, a significant proportion of people still find it challenging to comprehend. Some individuals are extra cautious about making errors while filing returns which could result into penalties. Such fear leads individuals to suppress their income or not file altogether. Simplification of the process can increase adherence significantly.
The ”Everyone is Doing It” Mindset
The reasons one justifies tax fraud are endless, but it could stem from the simple fact that they have seen others engaging in it, such as their colleagues or competition. The concept of herd behavior makes it very easy to rationalize stealing taxes from the government. The spread of this mindset will continue until there are harsh consequences of tax evasion placed.
3. Short-Term Thinking
Most people operate with the belief that immediate benefits are somehow more useful than long term consequences. While cutting corners when paying taxes might save money, it will greatly damage the quality of life for the person and their entire constituency.
4. The Gap Between Earning and Contribution
Tax-paying employees do not have the luxury of tax evasion because they have their taxes pre-paid out of their salary. But self-employed people usually have more leeway when it comes to proving their income, which is why people think that there is a gap between different people’s tax burdens.
Would altering the way in which taxes are presented improve compliance, such as portraying them as investments in the people’s future through paving roads, building hospitals, and instituting schools? Most likely yes. People should be encouraged to think of taxes as investments, not quotas that need to be met.
The Odd and Unique Forms of Taxation Seen Over India’s History
The domain of taxation in India is mammoth and has plenty of twists and turns. Currently, we have GST as well as income and corporate taxes. However, some of the past forms of taxation were truly outlandish and here are some of them noted.
1. The Mustache Tax
In some parts of India during British reign, some regions charged a fee on men who wanted to grow mustaches. Lasting masculinity is signaled by having a mustache, which the British proceeded to charge a fee for. Although crazy, this practice shows how different people took advantage of controlled culture systems for additional income.
2. The Window Tax
Some princely states copied this tax from the Europeans by charging people based on the number of windows in their house. Wealthier house owners with bigger bungalows tended to have more windows further increasing their taxes. A few people tried to escape this tax by boarding up the window openings of their houses!
3. The Salt Tax
After the Mustache Tax, this is probably the most well-known form of tax within the borders of India. The British imposed the salt tax in India, which made a necessity highly expensive for the poorer classes. The other use of this march was to serve as a centerpiece for the Gandhi’s initiative to reach to the masses for the rest of the freedom fight.
4. The Breast Tax
Historically in Kerala, women from lower castes were compelled to pay a tax if they wished to cover their breasts, with the tax amount determined by the size of their breasts. This cruel and oppressive levy was ultimately abolished due to the brave actions of Nangeli, who protested by severing her own breasts, which led to the tax’s eventual repeal.
Although the current taxation system is significantly more organized and equitable, these peculiar historical taxes illustrate how governments have historically employed inventive (and at times unjust) methods to generate revenue.
Taxation in the Gig Economy: Are Influencers and YouTubers Contributing Equitably?
The emergence of social media has given rise to a new class of earners—digital influencers, YouTubers, and freelancers. These individuals generate income through advertisements, brand partnerships, and sponsored content. However, the question arises: are they fulfilling their tax obligations like traditional employees and businesses?
1. The Ambiguity of Income Declaration
In contrast to salaried workers, influencers and freelancers frequently receive payments from various sources, including international brands. As many of these transactions occur via online platforms, accurately tracking income for tax purposes can prove difficult. Some influencers may under-report their earnings, operating under the assumption that 1. GST and the Digital Space
Numerous influencers and digital content creators are often unaware of their obligation to register for Goods and Services Tax (GST) when their annual income surpasses ₹20 lakh. Income generated from sponsored posts, brand partnerships, and affiliate marketing is classified as taxable services. Nevertheless, compliance rates remain low due to insufficient awareness of these requirements.
2. International Income and Taxation
A considerable number of Indian content creators derive their income from platforms such as YouTube and Instagram, which are operated from abroad. The Indian tax framework mandates that they pay taxes on this foreign income; however, not all influencers adhere to this requirement. Some exploit loopholes to avoid reporting their full earnings.
3. Crackdown on Non-Compliance
In recent times, tax authorities have intensified their scrutiny of digital transactions. Numerous influencers have received notifications requesting clarification regarding their income. In the future, enhanced enforcement measures and automated tax tracking systems may render it increasingly difficult for digital earners to evade their tax obligations.
4. The Need for Awareness and Simplification
Given that the gig economy is still relatively nascent, many creators lack a comprehensive understanding of their tax responsibilities. It is imperative for the government to focus on simplifying tax regulations for digital professionals while ensuring equitable taxation for all. tax authorities will remain unaware.
The Importance of Awareness and Simplification
Given that the gig economy is a relatively recent development, many creators lack a comprehensive understanding of their tax responsibilities. It is essential for the government to focus on streamlining tax regulations for digital professionals while ensuring equitable taxation for all.
Concluding Remarks
Taxation transcends mere numerical values; it encompasses behavior, historical context, and the dynamics of evolving economies. Gaining insight into the reasons behind tax avoidance, reflecting on the peculiar taxes of the past, and addressing the taxation issues of the digital era can contribute to establishing a more equitable and just system.
For taxpayers, the essential message is clear: while tax avoidance may appear advantageous in the short run, fair contributions are vital for fostering a stronger and more prosperous nation. For the government, simplifying tax frameworks and enhancing transparency could lead to improved compliance.
Therefore, the next time you encounter someone expressing dissatisfaction with taxes, remind them that it is not solely about their personal losses; it is about the collective benefits for society.
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Written by: Nandini, 4th year student of B.A.LL.B (hons ) at lovely professional University, Jalandhar.
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