Nitish taxes samosa; vada-pav should give Fadnavis an idea

By Mahesh Vijapurkar Is Nitish Kumar, Bihar’s chief minister, trying to get rid of Lalu Prasad? Is he trying to ensure that malaria does not dip in his state? In jest, the answer could be yes. He has decided to tax samosas which necessarily have potato, the staple tuber, and mosquito repellents. The levy would be 13.5 percent. He has also imposed a similar levy on sweets costing Rs 500 a kg and more, perhaps to cut down obesity and blood sugar. Recall that self-congratulatory acclamation of the entertaining politician Lalu Prasad: “Jab tak samose mein rahega aalu, Bihar mein rahega Lalu”. Nitish may have realised by now that working with his friend-turned-foe-turned-ally in Bihar is not going to be easy, especially when if not Lalu himself, his family members are in his cabinet. By taxing samosas he perhaps wants potato to go out of it. It would, by implication, mean the RJD chief gets out of Bihar. [caption id=“attachment_2584290” align=“alignleft” width=“380”]  Samosa (right) and vadas and pavs (left). Reuters[/caption] Though Bihar is not alone in widespread proliferation of P. falciparum mosquitoes – MP, Maharashtra, Odisha are the other states – malaria is a problem and mosquito repellent becoming expensive does not help. States are frantic for more revenue every year and the finance ministers find something or the other to impose a tax on. The imposts on potato-stuffed samosa and mosquito repellents are clear example of such desperation. But Bihar is not alone, of course. When finance ministers cut the tax on such items, they are sure to get headlines, like when Gujarat’s Vajubhai Vala, now Karnataka governor, imposed a five percent cut in VAT on string used to fly kites, bangles, hairpins, combs, bindis and kumkum, in 2012. The point is that the state had to levy such taxes in the first place. The gains from them are not much, and perhaps not worth the manpower, time, and money spent on collecting them. Each year, every state does come out with such brilliant ways to mop up more or gain goodwill of one section or the other. Take this samosa tax in Bihar. Who fries and sells them? The street vendor who can be found in practically every major street of a state, much like the vada-pav guy in Mumbai. Samosas are not packed and branded for sale to be taxed at the point of origin. It could be the tax collector’s nightmare. The answer lies, one supposes, in better tax gathering on already taxed items, and its optimal use. Both are difficult endeavours. They are not Sisyphus who, because he was condemned to do so, laboured to keep pushing a stone uphill all his life. We just don’t even bother. Instead of more efficient use of funds – which means no leakage due to corruption, better quality execution of anything undertaken with the taxpayer’s’ money – it is frittered away, as, for instance, in Maharashtra. It has burdened itself with having to compensate the toll collectors with whom it has contracts – estimated at today’s toll rates, at about Rs 900 crore – from levies imposed on trivia. It replaced a local bodies tax in two dozen major city governments and then, to keep to its populist poll promises, abolished that but finds it hard to generate the compensation of Rs 15,000 cr. Over 50 toll booths were closed and the government has to compensate some Rs 900 crore to those holding the franchise. Its deficit is running out of control – instead of a projected Rs 375 cr this fiscal to a ballooned Rs 8500. To meet the contingency of drought, not unusual in Maharashtra, it has levied a drought tax. Possibly, it has to take a cue from Bihar and tax vada-pav, the popular street food. And other states will have to find other similar items. Nitish Kumar has shown how.