It is well established universal and time tested truth in economy that income tax is the only effective instrument in the hands of state to maintain social equilibrium which is most essential to sustain social stability and peace. This critical role of income tax was specially discovered and appreciated from the very last decades of 19th century in both the sides of Atlantic with the advent of Fabian socialism which was the effect of huge wealth disparity particularly in the English society as a result of industrial revolution and colonialism. Fabian socialism is considered to be not only an epoch making development in the history of idealism but also the foster father of Marxism and democratic socialism, the two main streams which latter dominated the socialist thinking of the world till now.
It is social welfare which is the core phrase of all socialist movements drawing the huge responsibilities of the states to reshape the poverty torn society with numerous welfare measures rendering financially empowering the common people in mass scale. While with October revolution in Russia saw a considerable part of the world gradually became the Marxist nations with absolute state monopoly in financial affairs thus leaving little room for personal taxation to play. On the other hand post of October revolution, the capitalist prone rulers of western side of Europe particularly in England were feeling the repercussion of this new development with trade unions embracing this ultra left ideal with dream to create workers paradise.
So to counter this development another most important limb was born out of Fabian socialism, that is social democrat which in opposition of absolute state ownership and one party rule, propagating a mixed economy with coexistence of both state and private enterprises and multi part democracy with adopting core principles of social welfare. Although this moderate socialist principle was not very much accepted by the working class of western Europe but after many news of may economic problem be spiraled out of iron curtain of communist block countries to the west including perishing millions in Russia and china famine and Lenin’s recognition of capitalism as a main instrument for soviet development by NEW ECONOMIC POLICY calling it soviet capitalism, people of western world started to appreciate the fact that all is not well in communism including several compromise of personal freedom and ultimate acceptance of capitalism as a driving force of economy which western society adored most.
So in response to Marxism democratic socialism came in to fore since mid of 20th century which stood on two feet’s, one is social welfare and another is heavy personal income tax.
The principle of democratic socialism is simple. It fully allow capitalism to play and bloom but its ruling dispensation is always conscious about economic disparity in the society and impose heavy personal income tax upon high income group and spend the amount to the financially weaker section. This socialism is proven to be only successful state policy with demise and fall of Marxism throughout the world in 90s. its most successful practical application was made in Scandinavian nations where social welfare measures are popularly known as CRADLE TO GRAVE POLICY, means state will take care of you since your birth to death but at the same time will impose minimum 50% or more personal income tax with no deductions.
Now we see how this social welfare theory become popular in developing and under developing world and it is now mostly accepted policy in majority of democratic countries including in India. But in recent a serious matter which is emerging slowly like ice burg is social inequality which has taken dangerous proposition in spite of following social welfare and heavy personal income tax policy since independence. Now question is why? The answer is numerous. Firstly severe deductions and exemptions in income tax unlikely of western Europe and USA. Secondly acute corruption in income tax department and court letting the big fishes out of actual tax net, thirdly heavy influence of the capitalist on government thus huge generation of black money being channeling to Swiss banks instead of countries development and social welfare. It is often heard from our government and media that only 3% population out of 140 billion people have IT files and only 2% give tax. In recent many medias and economists have seen to evolve a strange theory that our tax collection is poor because we are poor nation and most of people are too poor to pay tax. But is it actual? Remember following facts:
A. India is worlds most significant country on contribution to billionaire list
B. it is worlds 5h largest economy and industrial country.
C. It is top nation on service, pharma and IT industries.
D. it is third in agriculture and home of maximum rich agriculturists.
E. third in manufacturing.
So these datas are sufficient to scuttle the false notion that we are in bracket of poor nation, so our direct tax collection is poor. in my opinion it a justification of most unjustifiable. The mammoth volume of our indirect tax collection and growing number of billionaires and millionaires even in a district and block level town and village are suffice to negate this most impractical and absurd theory. However it is good and most positive development that income tax department has ultimately detected and realized the fact unlike of western world income and income tax nothing to with number of tax files. It is all about the volume of bank and immovable property transaction which is the actual IT return of people of India which pushes the number of actual should be assesses more than 25% of our population. So ANNUAL INFORMATION STATEMENT OR 26AS is the actual return of income tax not the ITR because ITR is voluntary in nature but AIS is detection of tax evaders. Most welcome and first positive and revolutionary step on taxation front.
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