Rewarding Underperformance

Looking at the tax structure our government has it struck me that somehow it rewards under performance.

In every other scheme the incentives increase as you get closer to the target or exceed it but its reverse logic when it comes to taxes.

The more money you make the more tax you pay is logical but I do not understand the logic behind increasing the rate of taxation – It simply means that the government wants us to work less, remain unskilled, be complacent and do everything else which is demeaning and unproductive so that we enjoy the lowest rate in the tax slabs.

It defeats me completely.If I were the finance minister I would start at 30% and go down to as little as 10 % so more and more people pay up taxes honestly,more white money flows into the market and more and more people work harder and pick up the best skills so they can enjoy the fruits of labor.

May be this is the single step by which we can ensure double digit growth and foster a performance linked ,business oriented work culture in a country which thrives on honesty and hard work.


The Tax Man cometh…

Yesterday Jug Suraiya’s article in the times of India reignited the pain all tax payers feel around March. As the season changes from pleasant winter to hot scorching summer the tax man’s taqada (reminder) looms large and signals about the heat that one will face in the coming months.

There are several queries that I have :

1.After religiously paying 1/3 of what I make by toiling hard 365 days of the year ,sacrificing so many personal pleasures and enduring so much pain at the work place what I get in return is a TV ad intimidating me that “you pay up or else “.I really do not see how this can be tolerated.

First of all I am sharing with everyone ,many of whom do not do anything worthwhile and roam around with Z security and then I am not even worthy of a decent request ,lest a plea.

When in Mumbai Bhai log do the same we call it Hafta Vasooli.Is this any better?

2.The second most rediculous part is that you can be jailed for not paying up taxes which are so complex and many that it is impossible for anyone to file an impeccable return.On top of it the rules keep changing every now and then with no one taking the responsibility of informing the tax payer.Is there anything called customer service ?

Even if looked at practically I can either do a Phd Thesis on taxation in India or spend my time making money so I can cough it up for my not so fortunate bretheren.

A more decent approach could be –  as per the latest taxation laws or our interpretation you did not pay for X amount so first of all you need to pay it up and secondly we will charge the interest cost what the government has lost.

If someone has been paying 30 % of his income every year ,year on year how can it be assumed that for another 2 % he was trying to cheat.

3.The government arbitrarily keeps deciding what to do with our money without even bothering to ask the folks who funded the enterprise.As a run up to elections very tom,DICK and harry is promising free this,free that and now even free television.What next ? A visit to dance bars with wads of notes in hand to blow up on the whirling ladies.

That is my bloody money and you better watch out before promising all those goodies to the lazy good for nothing bums.

How can some self respecting person accept a free television ? Food and clothes are fine but free television ? I want to die of hunger watching a Nagarjuna Movie.Super !!!

4.The last and most important question How much in enough ? You have tax on salary,Leave travel,education cess,entertainment tax,fringe benefit tax,long term capital gain tax,short term capital gain tax,luxury tax,water tax,tax in your electricity bill,tax on your phone bill,there is even a tax on saving money.If you just leave your money in a saving account and you get some interest you have to pay tax on that too.

Lets talk about what we get in return :

1.Be ready to get blown away everytime you get out of your house.With so many bombs and bullets around even probability cannot save you for long.

2.If you don’t get riddled while having an evening with friends  paying taxes on food,wine etc. ,then live with the fear of being bombed while the gobermint buys 1000’s of bullet proof cars with tax collected from you.Aha it’s so nice and cozy in here.It is madame,how about some cheese and wine !

3.As summer approaches power cuts will become the norm.You can buy an inverter by paying the same amount as your electricity bill for a year and paying tax on the Invoice.The manufacturer piad the Excise duty but you need to pay the sales tax and if you cannot install it yourself a service tax too.

4.Water will be a scarce commodity very soon.Days are not far when you will realize that the health faucet is not responding so you need to find alternative means for maintaining hygiene.You will have to keep the phone number of tanker wallah handy who will deliver water of course with a tax on his bill too.The laughable bit here is that you may not get a bucket of water for the whole of summer but if you have connection you will have to pay the water tax for this period too.

5.Thick skinned that you are nothing is going to happen to you but in case it does you will have to face the ordeal of going to the free gobermint hospital and wait for your turn which may come only when you are long gone.If you are lucky enough to get a bed or something then you will get a number of free diseases along with it.The Oxygen keeps running out so may be you carry your won cylinder.You can buy it at your friendly neighborhood store after paying taxes.

If you choose to be alive and go to a private place be ready to pay tax o n doctor’s fee,medicines,X ray,Pathology etc etc.

But it is not all bad you see.Gobermint is quite considerate and loves all of us.You know why?

There is no tax on purchase or sales side for Fabric sold loose by the meter.Got the idea ? Exactly.

I have something in mind to ensure lasting peace-we should put a reverse drip  sort of a thing so that whatever blood is made during the day a part of it it automatically gets deposited in gobermints coffers – एक दिन का एक पाव.


Only then can this blood sucking monster be satiated.

Subhash Chandra Bose was a far sighted visionary and that’s why he said :

तुम मुझे खून दो मैं तुम्हे आज़ादी दूंगा

लो पियो मेरा खून , और मुझे आज़ाद कर दो

Fortune at the bottom of the pyramid?

Waiver of small and marginal farmers’ loans amounting to Rs 60,000 has been termed path breaking  by the government.The budget, however, offers little to address the larger problem of agricultural recession, the main reason behind severe indebtedness of farmers .

Official data shows that areas with the maximum concentration of small and marginal farmers will not benefit from the waiver. The Economic Survey that preceded the budget had suggested: “A second Green Revolution, particularly in the areas which are rainfed, may be necessary to improve the income of the persons dependent on the agriculture sector.” . It clearly suggests that farming has become almost an unviable option owing to increase in input costs and lower realization from produce which has unleashed a viscious cycle of indebtness amongst the farming community.

Small, marginal farmers make loss
Source: National Sample Survey Organization, Situation Assessment Survey of Farmers, 2003

As per Mohan Guruswamy, chairperson of the Delhi-based Centre for Policy Alternative “Seventy per cent of farmers who own less than one hectare do not opt for commercial credit. So the waiver bypasses them,”

Finance Minister P Chidambaram waived all ‘overdue’ loans due till December 31, 2007, of farmers with landholdings of up to two hectares (ha). For other farmers, the government has offered a one-time settlement: a rebate of 25 per cent if a farmer pays 75 per cent of the loan overdue. The waiver does not cover loans farmers are regularly paying—only 20 per cent farmer households are paying loans regularly. Only those who borrowed from government institutions will be covered so those who borrowed from moneylenders and other informal sources will not get any relief. And this is where a big portion of debt lies.Being illeterate farmers do not approach the banks due to lengthy procedures and paperwork – apart from all the paperwork a farmer has to get a letter from all banks operating in his area that he does not owe them any money before a loan for him can be considered.
The government claims the proposal will benefit 40 million farmers.Every second Indian farmer household is indebted. Of the 89.33 million farmer households estimated in 2003, 43.42 million were indebted. The average debt per farmer household was at Rs 12,595, and per indebted farmer household at Rs 25,902. Of late, farmers with more than two hectares of land are increasingly availing agricultural credit. The outstanding loan amount too has grown faster in case of farmers having more than 2.5 ha as compared to marginal (holding less than 1 ha) and small (less than 2 ha) farmers. On the other hand, the share of marginal farmers in formal credit distribution has come down from 28 per cent in 1981-82 to 25 per cent in 2003-04. The share of large farmers (with landholding above 2 ha) has remained at around 51 per cent since 1981-82. These figures demonstrate that farmers with large as well as small land holdings take credit but are not able to repay them due to adverse economics of the agricultural sector.

The current proposal will cover less than 50 per cent of the total debt of farmers in India. In 2003, the government estimated the total debt of farmers at Rs 1.13 lakh crore. Farmers owed Rs 65,000 crore to formal institutions and Rs 48,000 crore to non-institutional agencies. The debt has gone up since then.

Smaller the landholding, more the farmer depends on non-institutional credit
Out of relief net
Source: National Sample Survey Organization, Situation Assessment Survey of Farmers, 2003

The bigger picture
According to the Economic Survey, the growth rate of food grain production is 1.2 per cent, lower than the annual population growth rate of 1.9 per cent. Creation of additional irrigation potential has come down from 3 per cent annually in the 1990s to 1.8 per cent in 2007. Agricultural growth is expected to be around 2.6 per cent against 3.8 per cent in 2006.In such a scenario it will take a long time before we can see disposable incomes which will boost consumption for discretionary items on a farmers shopping list such as apparel,footwear,toiletries etc.

Fortune at the bottom of the  Pyramid ?

While a romantic idea,with the above in view I fail to recognize how the Indian farmer can be described as :

The world’s most exciting, fastest-growing new market? and fortune where you least expect it: at the bottom of the pyramid. Collectively, the world’s billions of poor people have immense entrepreneurial capabilities and buying power(??).

The book talks about Co creation and  challenges readers to re-evaluate their pre-conceived notions about the commercial opportunities in serving the relatively poor markets of the world.Somehow I cannot understand how someone who is already not able to repay his debts will transform into a profitable customer to serve and how those who are not even able to distribute the largesse effectively will make it possible.

The website further describes the book as :

“The Bottom of the Pyramid belongs at the top of the reading list for business people, academics, and experts pursuing the elusive goal of sustainable growth in the developing world”

I sincerely feel that that’s exactly where it will remain for a long long time to come at least in the context of India,if things do not change at the grassroot level.