India needs lower taxes to be globally competitive – Arun Jaitely

India needs lower taxes to be globally competitive – Arun Jaitely

Swatantra whole heartedly welcomes his view. It was Rajaji, who was the pioneer, at least in the Indian context, on liberal business environment, Minimum government-Maximum Governance and less tax and more freedom, 55 years back itself. Rajaji was much ahead of his time whose views against the socialist approach of the then charismatic Prime Minister Nehru and license-permit-quota raj is history. In fact Rajaji was instrumental in founding  Swatantra Party which proclaimed its support for Liberal Business environment, Minimum Government & Maximum Governance, Individual Freedom, etc. The time for his thoughts almost arrived – that is what we can say.


click here to know more about Rajaji’s Swatantra Party

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In the globalised business environment India needs to be highly competitive, more so with the kind of population we have. The largest democracy in the world, we are lowest in technological innovation, exports and GDP. Just 200 years back we were the number one and after the exit of Britain in 1947 we have never regained our position mostly due to socialist policies of the Government until 1991. Even after 1991 the License-Permit-Quota raj continued to dominate. It was approval in the place of License. Various laws in the place of permit and high taxation and bureaucratic failure in the place of quota resulted in our manufacturing segment coming down to its lowest ever during the last several years. While the income has increased, expenses [inflation] also has increased resulting in inequality and social unrest.

Arun Jaitely has rightly said India needs to reduce its taxes. We have been saying that for several years and tax reform and tax reduction will help us in many ways.

Not just helping the manufacturing competitiveness but also reduce the income inequality amongst the society and most important will eliminate corruption to a large extent and we sincerely hope majority of the people will comply with rules & regulations and pay taxes properly.

To achieve this it is important to keep the taxes as low as possible. We may suggest that the Income tax may be abolished completely. If the Government cannot do that right now, at least the individual tax can be eliminated and corporate tax reduced to as low as 6% to 10% instead of the present 30% maximum. This will ensure more compliance. Same time Government must integrate various economic offences laws into one which is effective and practical.

In the Service tax segment, we believe, the present 15% is very high and it may be reduced to 1% t0 3% with some services exempted from tax net. It is to be noted the service tax is covering more or less everything and hence this is affecting the common man heavily.

The same is applicable to Excise and Saes tax [VAT]. It is important to reduce the tariff to as low as 1% to 4% as this is ultimately being paid by each one of us.

In case GST is implemented, Swatantra suggest that the overall tax may be not more than 3% to 5% with Income tax abolished. In addition Government may levy Customs duty for imports.

In line with the above it is also important that the various States should come out with tax reforms. For instance property transaction tax of 10% and above in many states may be reduced to 1%. Similarly the property tax, professional tax, etc etc must be either abolished and or merged with the GST and or reduced to lowest level possible. To avoid properties being purchased by one segment [rich segment] and to ensure all of us have homes, the Government may levy lowest tax for the first home of the family [defining family in this context is very difficult but not impossible] and levy highest property transaction registration charges and property taxes for the second home. This may help the real estate cost coming down and also affordable. Rental also may come down.

For all this to happen the key is applying Minimum Government & Maximum Governance in practice. Currently 90% of the revenue goes towards salary of Government employees, various welfare schemes and expenses of the Central & various State Governments leaving little amount for infrastructure development.

By reducing the work force expenditure can be reduced. The Government can keep little work force for effective monitoring of tax compliance and implementation of projects. As a beginning the Government may stop further recruitments and start the true process of privatisation – which includes Railways. All the infrastructure projects may be on the PPP basis.

In the PPP model, there are lots of irregularities, for instance in the toll collection area. Government needs to take a complete review of its PPP policy and have a new one which can ensure win-win-win situation for the Government-Private Player-People. In the present policy the first two are in the win-win segment conveniently forgetting People – the real King of Democratic India.

India needs complete review of all its policies – labour policies, banking segment, education, taxations, legal, electoral policy, etc etc. It is not possible to make a turnaround overnight like a movie. It may take 10 years at least. But we need to start somewhere. We believe Arun Jaitley is in the right track and pray the Almighty to give him the necessary strength to act.

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