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Finance Minister, Shri Arun Jaitley resigned and migrated to Australia.

Jaitley against burdening salaried, middle class with more taxes

PTI  New Delhi, November 22, 2014

First Published: 17:24 IST(22/11/2014) | Last Updated: 18:01 IST(22/11/2014)

Finance minister Arun Jaitley on Saturday said that he does not favour burdening the salaried and middle-class with more taxes but would go after the evaders in widening the net.
In fact, he would encourage more money being put in the pockets of tax payers that will lead to spending and collection of more indirect taxes.
"This widening of the tax base. What does it mean? ...I pay the same indirect tax as my attendant. Our volume of consumption may be different. So everybody is paying indirect taxes.

"And literally almost half your taxes are indirect taxes today. He pays excise, he pays customs duty, he pays service tax. Now as far as income tax is concerned, to bring those who evade tax is widening the tax net, I am all for it," the minister said in an interaction with PTI journalists at PTI headquarters.
He was replying to a question on whether his budget would look at widening the tax base to maximise revenue.
Jaitley, who will be presenting his first full fledged budget in February, said that in his last budget he had increased the tax exemption limit from Rs. 2 lakh to Rs. 2.5 lakh and would even raise it further if he had more money.
"After all what are we talking about Rs. 2.5 lakh today means, taking all the deductions which we have given, somebody up to Rs. 3.5-4 lakh does not have to pay tax. So we have reached the situation broadly.
"One earning Rs. 35,000-40,000 per month, if the person puts some money for savings, (he) won't have to pay tax. But people falling in this bracket say that they don't save anything with salary of Rs. 35,000-40,000 (with) the present cost of living, the transport cost, the fees of children and so on," Jaitley said.
Therefore, the minister said, he was against reducing the exemptions to widen the tax net. "Then that's not my approach," he added.
"So I am quite willing, if I had my way and I had more money in my pocket, I would like to expand. But today the revenue position is challenging. Last time I gave several concessions, which were actually beyond my means.
"But it's all fine to bring those who evade tax under the tax net. But to bring this vulnerable section into the tax net, that can't be the policy today. In fact if you put additional money in their pockets and allow them to spend, then I collect correspondingly more indirect taxes so I will rather encourage more economic activity."
On black money within the country, he said: "It is huge quantity and more easily traceable. Because you go to real estate, you go to land, you go to mining, you go to jewellery, you go to luxury goods, you will find the domestic (black money). You go to educational institutions, you will find it there. Therefore to trace out the buyers and the recipients is also easy."

• 34 comments
• HindustanTimes
• SiDevilIam

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  SiDevilIam • an hour ago

  Some of these items are long-term mechanisms, particularly human and
  physical capital formation. Most of these empirical studies focus on the
  long-term effects, over a period of five years or more, but many
  investigate short-term dynamics as well. The evidence for short-term,
  demand-side effects of tax policy is less robust and less compelling,
  perhaps owing to the difficulty of disentangling short-term factors and
  matching events. However, there is some evidence that longer-term,
  supply-side effects occur sooner than previously thought, such as within
  the first few years of a policy change.
  In any case, the lesson from the studies conducted is that long-term
  economic growth is to a significant degree a function of tax policy. Our
  current economic doldrums are the result of many factors, but having
  the highest corporate rate in the industrialized world does not help.
  Nor does the prospect of higher taxes on shareholders and workers. If we
  intend to spur investment, we should lower taxes on the earnings of
  capital. If we intend to increase employment, we should lower taxes on
  workers and the businesses that hire them.
  
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  SiDevilIam • an hour ago

  These results support the Neo-classical view that income and wealth must
  first be produced and then consumed, meaning that taxes on the factors
  of production, i.e., capital and labor, are particularly disruptive of
  wealth creation. Corporate and shareholder taxes reduce the incentive to
  invest and to build capital. Less investment means fewer productive
  workers and correspondingly lower wages. Taxes on income and wages
  reduce the incentive to work. Progressive income taxes, where higher
  income is taxed at higher rates, reduce the returns to education, since
  high incomes are associated with high levels of education, and so reduce
  the incentive to build human capital. Progressive taxation also reduces
  investment, risk taking, and entrepreneurial activity since a
  disproportionately large share of these activities is done by high
  income earners.[4]
  
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  SiDevilIam • an hour ago

  So what does the academic literature say about the empirical
  relationship between taxes and economic growth? While there are a
  variety of methods and data sources, the results consistently point to
  significant negative effects of taxes on economic growth even after
  controlling for various other factors such as government spending,
  business cycle conditions, and monetary policy. In this review of the
  literature, I find twenty-six such studies going back to 1983, and all
  but three of those studies, and every study in the last fifteen years,
  find a negative effect of taxes on growth. Of those studies that
  distinguish between types of taxes, corporate income taxes are found to
  be most harmful, followed by personal income taxes, consumption taxes
  and property taxes.
  
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  SiDevilIam • an hour ago

  For instance, the Congressional Research Service (CRS) has found support
  for the theory that taxes have no effect on economic growth by looking
  at the U.S. experience since World War II and the dramatic variation in
  the statutory top marginal rate on individual income.[1] They find the fastest economic growth occurred in the 1950s when the top rate was more than ninety percent.[2]
  However, their study ignores the most basic problems with this sort of
  statistical analysis, including: the variation in the tax base to which
  the individual income tax applies; the variation in other taxes,
  particularly the corporate tax; the short-term versus long-term effects
  of tax policy; and reverse causality, whereby economic growth affects
  tax rates. These problems are all well known in the academic literature
  and have been dealt with in various ways, making the CRS study
  unpublishable in any peer-reviewed academic journal.[3]
  
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  SiDevilIam • an hour ago

  What Is the Evidence on Taxes and Growth?
  
  December 18, 2012
  By
  William McBride
  (PDF) Special Report No. 207: What Is the Evidence on Taxes and Growth?
  Introduction
  The idea that taxes affect economic growth has become politically
  contentious and the subject of much debate in the press and among
  advocacy groups. That is in part because there are competing theories
  about what drives economic growth. Some subscribe to Keynesian,
  demand-side factors, others Neo-classical, supply-side factors, while
  yet others subscribe to some mixture of the two or something entirely
  unique. The facts, historical and geographical variation in key
  parameters for example, should shed light on the debate. However, the
  economy is sufficiently complex that virtually any theory can find some
  support in the data.
  

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  SiDevilIam • an hour ago

  A man of his responsibility, being finance minister and all, ought not be explaining his tax policy to a reporter. I know all about direct and indirect taxes. I also know tax forgivance to a certain section of society. Taxes are spread all over that must be paid, whether you like it or not. Pity that readers has to learn from the last man of the earth, Mr Arun Jaitley.
  Saving BJP constituency is the goal. Why talk about taxes now? Budget is not due till next February? State elections. That's why. Nasty politicians, nasty strategy and their vulgar description of citizen's duty (not) to pay due tax.
  I would fire him for his damned silly little talk-talk.
  ...and I am Sid Harth
  
  Source: HT