Widening the net
WHILE elections form governments and grab all the headlines, the functioning of governments is more humdrum and fundamentally revolves around two things: taxing and spending. To work well, they must have enough resources to effect policy and, indeed, define and build their nations. Governments raise money through taxation, hence the political maxim of democracies: "No taxation without representation". A popular government is, therefore, mandated to raise taxes to make for good governance. Naturally, when taxpayers avoid paying taxes, or when internal revenue departments fail to collect enough, government itself is hobbled and the nation as a whole suffers. Strange then that given this equation, taxpayers the world over -- even in mature democracies -- are generally not happy to be taxed. This fact is borne out by the existence of tax consultants who, for a hefty fee, will advise their wealthy clients on how to not fork out too much in taxes.
There is a difference, however, between tax evasion and tax avoidance. The former is downright illegal, while the latter tries to scrimp within the letter of the law. Democracies have a built-in mechanism to ensure that all taxes are ultimately progressive, in that it does not burden taxpayers unfairly, as an electorate unfairly taxed is not about to return an unjust government. This is also why taxation is viewed as a wealth redistribution mechanism, which makes a good government a bit of a Robin Hood. However, in a world where wealth accumulation driven by capitalism steers the economy, it is no surprise that the rich sometimes resent their comparatively heavier tax load. Politicians juggle with this paradox as a matter of course and a government's annual budget is very much a political instrument trying to please as many people as possible.
How then can social justice be achieved in a way that will not drag down business and debilitate investment, but still fill the coffers of the national treasury? Indirect taxation as, for example, the goods and services tax (GST) has long been discussed and will be implemented sooner or later. Most importantly, individual choice is the hallmark of this type of taxation, which puts the emphasis on consumption rather than income. It is not suggested that corporate tax, import duties and other such levies are to be done away with. Rather, the argument is that there is scope to democratise taxation itself. The GST, too, is not bereft of collection problems. But developed countries already have it, and others are on their way to imposing one. They should not be taking their time about it.
How then can social justice be achieved in a way that will not drag down business and debilitate investment, but still fill the coffers of the national treasury? Indirect taxation as, for example, the goods and services tax (GST) has long been discussed and will be implemented sooner or later. Most importantly, individual choice is the hallmark of this type of taxation, which puts the emphasis on consumption rather than income. It is not suggested that corporate tax, import duties and other such levies are to be done away with. Rather, the argument is that there is scope to democratise taxation itself. The GST, too, is not bereft of collection problems. But developed countries already have it, and others are on their way to imposing one. They should not be taking their time about it.
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