Cess in the tax cesspool
by Sandhya Jain on 20 Dec 2011 10 Comments

The morally-challenged UPA regime, accused of policy paralysis by big business seeking ever more concessions with each passing quarter, has moved quietly but speedily on a mission to decimate the middle class. Whether or not these measures enjoy covert political consensus, the fact remains that not a single political party has opposed this raid on middle class incomes through special cesses, even as inflation and petrol prices jeopardize its financial and nutritional status and hurt aspirations for personal homes.

A special cess on each bill paid by the citizen – besides income tax, property tax, sales tax, service tax, road tax, et al – is now the new normal. In one saving scheme where fixed installments are made for a fixed number of years, Rs. 155/- has been levied on every installment of Rs. 10,000/-. We need a white paper on what the corporate sector contributes to the economy if we juxtapose its taxes with ‘concessions’ like cheap land, tax holidays, cheap loans made free by not chasing default, and so on.

Some corporate leaders have decried the UPA’s decision to defer foreign direct investment in multi-brand retail, saying it hurts growth, while policy paralysis makes them want to live and do business elsewhere. While they are free to go wherever they feel welcome, some questions legitimately arise: what have Indian corporates given to the nation in lieu of the policy initiatives of the past seven years that favoured them over all other sections of society? If they need fresh concessions from government every year, does it mean all growth is illusory? If India needs FDI to develop the retail sector, does this mean that Indian captains of industry have no talent or resources of their own, and can only function as subordinates of western capital?

Currently, the Planning Commission, that brilliant body that said an urban citizen can live on Rs. 32/day [one litre of milk + one banana, till the next price rise], is pushing for a green tax of Rs. 2/litre on petrol, along with a 3% cess on vehicle cost to be clubbed with the insurance policy. This principal of polluter pays is being invoked to discourage ‘indiscriminate use’ of private vehicles.

In other words, government wants the middle class to buy vehicles so that manufacturers can maintain their elitist lifestyles, and banks can profit from the ever-rising interest rates on loans. But the common man should not drive these cars because politicians and bureaucrats who move around free at taxpayer expense want clear roads! No one admits that public transport is inadequate in many areas; no one dares suggest that if government doesn’t want cars on the roads it should close the factories instead of subsidizing them with land and other facilities at taxpayer expense. Why does government allow import of gas-guzzling SUVs or superfast motorcycles that cost more than cars? Anyway, should not such egalitarian schemes be implemented only after – barring the President and the Prime Minister – every politician and bureaucrat pays for his own vehicle, fuel, and parking charges?

We must revisit the concept of Liberalisation-Privatisation-Globalisation. Originally, liberalization was intended to liberate the private sector from the license-permit raj and its inspectors. It never meant a shift from a mixed economy to a Crony Capitalist economy, where politicians and bureaucrats would conspire to sell off profit-making public sector units along with their real estate to chosen business houses. The idea was not to sell sovereign natural wealth like coal, iron ore, gold, or gas, to greedy corporates (Indian and/or foreign) without reference to issues like sustainable extraction, environmental balance, and rights of local populations.
It did not mean outsourcing of State responsibilities like power generation when the private sector has consistently failed to meet allotted output in three successive Plans. In Delhi, instead of enabling DESU to crackdown on power thefts and modernize equipment, the state government brought in private companies as costly middlemen to distribute power from State utilities like NTPC and DVC, thereby tripling citizen’s bills. Currently, Delhi cabinet is split over the chief minister’s determination to give a bailout package to these discoms. The chief minister is also keen to privatise the city’s water supply. If she can’t even manage water after making a mess of public transport and giving us the stench of the Commonwealth Games, she should make way for someone who can. Merely misusing power to enhance property circle rates by 350% in a single year does not mean we have a better city; it only throws the middle class out of the market.

The Centre must realise that Delhi’s experiment with statehood has failed, revert to the old Chief Executive Councillor system, and concentrate on proper administration of the city. After trifurcation of the Municipal Corporation, the NDMC should be re-united with MCD as a fourth unit, given due share of state taxes, and all parts of the city governed equally without bias.  

As for the original idea of Globalization, it meant that Indian public sector firms like ONGC would compete for business abroad, like private sector companies. But despite its initial success, ONGC was made to play second fiddle to the aspirations of private firms. Other PSUs like Coal India were disfavoured as foreign multinationals bid for mines in India; VSNL and BSNL suffered from the un-level playing field created to pamper private operators (like freedom to use cheaper Chinese equipment). Now one corporate is throwing tantrums to force entry of FDI in airlines, while public carriers were denied profitable routes for the sake of some blue-eyed entrepreneurs.

We have split into Rich India vs. the Rest of India. Rising prices and rising taxes through a creeping army of levies on fixed deposits, telephone bills, et al, are a perfect tool to crush the thinking middle class so that it cannot raise its head against poor government policies. This is the American way - have a weak middle class tied up in an army of debt instruments needing to be serviced every month, while employers have the right to fire at will (something corporates and their slavish camp followers are keen to bring to India), and you have the Republic (read dictatorship) of the Super Rich industrial and business houses. India’s imitative elite is desperate to shift to the American paradigm, where parents and grandparents will not bequeath us their estates, but their unpaid mortgages!

The author is Editor, www.vijayvaani.com

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