CANONS OF TAXATION
Indian national and State direct and indirect taxes in the current context and situation needs serious introspection by the Parliament, Judiciary and Executive. The nation is at a continuous state of dispute with the taxpayer.
We need to look at the canons of taxation and also India’s written history and sources from text on how a good and able tax system should evolve and work.
Direct and indirect taxation has been taken beyond truth, value, trust and faith. Taxation is a means to the end of the well administered and managed democratic functions of State. It needs to be free from distortions , anomalies and aberrations. Its administration must command respect and admiration.
The canons of taxation have turned into twin turret cannons. These have been incorporated negatively against citizenship by –
- Administrative Law
- Injustice in Law
Law is ever changing and evolving. It is what one is made to believe in.
In this period of 75th year of Independence, a Tax Payer is conveyed a Tax Code or Text of the law up to 999 pages, a little short of a 1000.
The Canons of Tax are briefly:
(i) Canon of Equality or Equity
It is proposed that every Adult in this nation should be taxed. There should not be any exceptions or exemptions. There need not be any exemptions to the individual who needs to be free to decide what is best to be done with post-tax savings.
(ii) Canon of Certainty
Death and taxes are the only certainty. Everything else is transient. There need not be any uncertainties, ambiguities that assessing officers can twist and turn that goes into litigation.
(iii) Canon of Economy
Cost of collecting taxes is the lowest in the world. There are enough and more people employed by the Government, and the Governments have the means to collect taxes. The existing people and mechanisms are sufficient to collect intended taxes. The evolution of digital rupee and means can make collection easier from all earners up to the bottom of the pyramid.
(iv) Canon of Convenience
Taxes can be collected efficiently. As Chanakya said, “taxes should be collected like the evaporation of water and distributed like rain.”
Modern economists have added more in the list of canons of taxation.
These are:
(v) Canon of Productivity
Every citizen need not slog to pay taxes like ‘Lagaan’ and the atmosphere in the nation should be that people pay up with the least effort or ease. Door to Door collection is a possibility – the Postman or a Newspaper distributor or garbage collector can also be a tax collector.
(vi) Canon of Elasticity
It has already happened. It will expand when equality and justice prevails. This needs to evolve to zero litigation and all disputes are settled by amicably by negotiation.
(vii) Canon of Simplicity
Sorely missing. All Acts and Rules need to be simple. The implementation needs a change in orientation. This would happen when every person is taxed.
(viii) Canon of Diversity
Do not exclude transgenders. Make prostitution legal. Every conceivable income can be taxed. A mechanism of secret tax payments can also legitimize illegal or illicit incomes by Voluntary Inclusions – Other Incomes.
What can be done is to remove all current exclusions and bring them under the tax net. Salt and rice can bear a taxation of 5 percent. Even Gandhiji would have agreed on a convincing argument that every person or thing be taxed.
Poll Tax:
Every Voter needs to pay a tax. This can begin with Rs 300 per voter, per year, and progressively increased to Rs 1000 per voter, per year. Every voter needs to be a taxpayer and every taxpayer needs to vote.
