Budget 2013: How much more can you soak the salaried schmuck?

In the midst of our Finance Minister's "business as usual" budget speech, Shri Chidambaram acknowledged the elephant in the room: "In 2011-12, the tax GDP ratio was 5.5 percent for direct taxes and 4.4 percent for indirect taxes. These ratios are one of the lowest for any large developing country and will not garner adequate resources for inclusive and sustainable development."

Shortly on its heels came Nitin Pai's scathing response on my Twitter feed, retweeted by Sadanand Dhume: "Why would tax compliance increase if taxpayers know most of their money will go into wasteful, leaky spending programmes?" Hear, hear and all that, except such principled tax evasion is not an option for us salaried schmucks. When will we get to tick that little box on our tax returns?

"Never. The principle at work has always been 'soak the soakable,'" Dhume shot back. We are eminently soakable indeed, as in the 2.5 percent of the population that pays income tax in this country. I don't know how many of these 32 million Indians are salaried employees, but I would wager we account for a significant chunk.

Reuters

Reuters

We are are literally a captive tax base, our taxes captured at source, while we scramble to supply copious documentation to garner our meager exemptions. I nearly lost my 2012 exemption for my daughter's preschool fees because the official receipt didn't contain that critical word "tuition." Apparently, colourful phrases like "Fees for 2nd term, Oct-Dec" would not suffice for our finicky tax-wallahs. But we persevere nevertheless, diligently investing in tax-exempt bonds, jumping through hoops for home loans -- to buy flats whose prices spiral ever upwards thanks to someone else's black money. All this while we pay the same indirect taxes as the very rich on the few luxuries we can afford -- which now include air-conditioned restaurants and mobile phones that cost more than Rs 2000.

White is right in India in almost every respect except income -- where kaala is king, cheerily flouting all the rules, and rewarded for it. Chidu's grand 10 percent surcharge on those making more than Rs 1 crore came with this dismal acknowledgement: "There are 42,800 persons – let me repeat, only 42,800 persons – who admitted to a taxable income exceeding 1 crore per year." That's right, only 42,800 people who foolishly fess up, while the rest blithely evade taxation in plain view of the nation. Be assured, even this teeny minority will have to bear this indignity only for a year.  Never mind that those who make Rs 10 lakh a year have long borne the indignity of being taxed at the same rate as someone who makes ten times as much.

The number of eligible tax payers are no less mysterious downstream. "In a country of 1.2 billion, having only 1.4 million tax payers with income above Rs. 10 lakh (and only 4 lakh assessees with income above Rs. 20 lakh) seems really low!" Ajay Shriram, Chairman of DCM Shriram Consolidated Ltd, tells Hindustan Times. The understatement gains renewed force to irk when I turn the page to read that the richest Indians are consuming most of the subsidies intended for the poor. According to the Economic Survey, the richest quintile in rural India receive  52.6 percent of the LPG subsidy compared to the .06 percent consumed by the poor.

No wonder, I get less worked up about dole-outs to the poor than the 369 gas cylinders delivered to industrialist Naveen Jindal’s home. There is perhaps no better symbol of the entitlement of the very rich than the Gymkhana, with its exclusive membership and hugely subsidised rates for food and alcohol. Because, really, who else could be in greater need of cheap khana and daaru more than our super-wealthy?

Yet any talk of taxing the very wealthy produces an instant volley of protests from those who argue it will only encourage further tax evasion. Since these guys are so good at cheating the system, we should just concede their superlative talent and not bother taxing them at all. They, after all, are not "soakable" -- except when they buy stuff that is hard to hide, as in "imported luxury goods such as high end motor vehicles, motorcycles, yachts and similar vessels."

"Our parents wasted all their money educating us. We should have just dropped out of school and gone into bijness," says a friend over brunch as we survey a bevy of Birkin-toting socialites. Every time I look at my monthly salary slip, I can't help but think he's exactly right.

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