Government needs resources to run the administration of the nation. Taxes are levied since the history of administration began with the rule of kings. It’s a system for collection and distribution of the surplus held by the rich to the have-not’s in the society. It also aims at development of the infrastructure and investment for the welfare of the citizens. However, a country’ s progress can be gauged by the efficient and effective administration rather than by the quantum of taxes collected from its constituents.
There are countries that levy the taxes in all the possible ways but spend them unproductively for populist schemes keeping the vote banks alone in the focus and a part drained through corruption. No tax shall be levied or collected except by the authority of law of the country. In India, the power to levy tax is derived from the Constitution of the Republic.
Types of Taxes
Based on who levies them, taxes fall into Central, State and Local government taxes. Depending upon the effective timing, they can be Retrospective or Back-dated, Immediate, and Prospective taxes. Again looking to the method of taxation, they can be grouped as direct and indirect taxes. The one affecting a person directly, like the Income tax and Sales tax is the direct tax. When a tax produces indirect impact on the citizen such as Customs duty, Service tax, and Excise duty, it is an indirect tax.
Is the purpose of taxation served?
From cradle to the cemetery, every citizen pays taxes of one kind or other. Whether service is rendered or not, tax has to be paid. Water tax is collected even before the concerned authority lays the pipeline and water flows to the households. A person or business pays a range of taxes for the education, land, house, water, production, consumption, entertainment, profession, sales, service, income, expenditure, profit and wealth. The delayed payment of any tax will lead to another tax in the form of interest and penalty. In other words, government taxes everyone and everything thus removing the disparity between the poor and the affluent at least on this score.
In India, every new possible tax is introduced while the end use of the existing taxes is is a big question mark. British Raj levied it for filling the coffers of the empire. Swaraj taxes in all possible ways in the name of augmenting revenue to the government but the rulers enrich themselves to live as the modern kings each nurturing their own groups and factions. The Poor becomes poorer while the Rich growing richer.
A clean and efficient government will levy less taxes but provide more welfare to the residents of the country.
(Author is a Ex-Banker and can be contacted on email@example.com)