GST : Modi Taxes the Poor to Reward the Rich |

For whom it is good and simple? For whom it is a burden?

The Goods and Services Tax regime is on us now. Modi had termed it ‘Good and Simple Tax’. For whom it is good and simple? For whom it is a burden?

Take for example, the service tax subsumed under GST now.

Service Tax was introduced on 3 services at 5% in 1994-95. The list of services to be taxed was gradually increased and in 2009-10 service tax was levied on 117 services at 10% rate. In 2011, the system was changed to bring all services into service tax net and exclude services specified in a negative list.

The service tax rate went up to 15% by 2017-08 and now GST is going to be 18% for many services (for example mobile charges).

Take a direct tax, for example Corporate Income Tax.

Modi government plans to reduce Income Tax for corporates from 30% to 25%. That reduction will be offset by the increased collections in GST, an indirect tax.

What is the problem? Read on!

Indirect taxes are such taxes that are not imposed directly on land or on a house or on income but are paid by the people indirectly, in the form of higher prices for what they buy.

Modi government and ideologues of BJP and RSS celebrate the introduction of GST.

The state imposes taxes on sugar, mobile bills, kerosene, matches, and all sorts of articles of consumption; these taxes are paid to the Treasury by the merchant or by the manufacturer, but, of course, he does not pay it out of his own pocket, but out of the money his customers pay him. The price of mobile recharge, sugar, kerosene, and matches goes up, and every purchaser of a mobile recharge or of a kilogram of sugar has to pay the tax in addition to the price of the goods or services.

For instance, if, say, you pay Rs 100 for a mobile recharge, Rs 20 (approximately) constitute the tax: the mobile phone company will pay the tax to the Treasury and will collect the sum from every customer. Thus, indirect taxes are taxes on articles of consumption, taxes which are paid by the purchaser in the form of higher prices for the articles he buys.

It is sometimes said that indirect taxation is the fairest form of taxation: you pay according to the amount you buy. But this is not true.

Indirect taxation is the most unfair form of taxation, because it is harder for the poor to pay indirect taxes than it is for the rich.

… plan to reduce Income Tax for corporates from 30% to 25%

A rich person’s income is hundred times or even a thousand times as large as that of a farmer or worker. But does the rich man need a hundred times as much sugar? Or thousand times as much mobile talk time, or matches, or kerosene? Of course not! A rich family will buy twice, at most, three times as much kerosene, mobile talk time, or sugar as a poor family. But that means that the rich man will pay a smaller part of his income in taxes than the poor man.

Let us suppose that the poor farmer’s income is Rs 1 lakh a year; let us suppose he buys Rs 60,000 worth of such goods and services as are taxed and which are consequently dearer. Of these Rs 60,000 the GST would amount to about Rs 10,000 (at 18%). Thus, the poor farmer will pay 10% of his Rs 1 lakh income in GST.

Let us suppose that a rich man has an annual income of Rs 1 crore. He will buy Rs 30 lakh worth of goods and services taxed under GST. He would pay a tax of about Rs 5 lakh under GST. Thus, the rich man will pay only 5% of his income in indirect taxes. The richer the man, the smaller Is the share of his income that he pays in indirect taxes.

That is why indirect taxation is the most unfair form of taxation. Indirect taxes are taxes on the poor.

And so, we demand the abolition of indirect taxation and the introduction of a progressive tax on incomes and inheritances. That means that the higher the income the higher the tax.

Those who have an income of Rs 10 lakh per annum will pay 10% effective tax (Rs 1 lakh income tax, Rs 9 lakh after tax income). if the income is Rs 20 lakh, 20% effective tax (Rs 4 lakh total tax, Rs 16 lakh after tax income) must be paid, and so on. The smallest incomes (let us say incomes of under Rs 5 lakh) do not pay anything at all.

The richest pay the highest taxes. Such a tax, an income-tax, or more exactly, a progressive income-tax, would be much fairer than indirect taxes.

And that is why the we are striving to secure the abolition of indirect taxation and the introduction of a progressive income-tax. Of course, all the property-owners, all the capitalists, object to this measure and resist it. Only through a firm alliance between the rural farmers and the urban workers can this improvement be won from the ruling classes.

This is an adaptation of a text written more than 110 years before. Original text – excerpts from To the Rural Poor by V. I. Lenin

Indirect taxes are such taxes that are not imposed directly on land or on a house but are paid by the people indirectly, in the form of higher prices for what they buy.

“The peasants and workers together form nine-tenths of the population and pay nine-tenths or eight-tenths of the total indirect taxation. And so, the Social-Democrats demand the abolition of indirect taxation and the introduction of a progressive tax on incomes and inheritances” – Lenin

The state imposes taxes on sugar, vodka, kerosene, matches, and all sorts of articles of consumption; these taxes are paid to the Treasury by the merchant or by the manufacturer, but, of course, he does not pay it out of his own pocket, but out of the money his customers pay him. The price of vodka, sugar, kerosene, and matches goes up, and every purchaser of a bottle of vodka or of a pound of sugar has to pay the tax in addition to the price of the goods.

For instance, if, say, you pay fourteen kopeks for a pound of sugar, four kopeks (approximately) constitute the tax: the sugar-manufacturer has already paid the tax to the Treasury and is now exacting from every customer the sum he has paid. Thus, indirect taxes are taxes on articles of consumption, taxes which are paid by the purchaser in the form of higher prices for the articles he buys.

It is sometimes said that indirect taxation is the fairest form of taxation: you pay according to the amount you buy. But this is not true.

Indirect taxation is the most unfair form of taxation, because it is harder for the poor to pay indirect taxes than it is for the rich.

The rich many s income is ten times or even a hundred times as large as that of the peasant or worker. But does the rich man need a hundred times as much sugar? Or ten times as much vodka, or matches, or kerosene? Of course not! A rich family will buy twice, at most, three times as much kerosene, vodka, or sugar as a poor family. But that means that the rich man will pay a smaller part of his income in taxes than the poor man.

Let us suppose that the poor peasant’s income is two hundred rubles a year; let us suppose he buys sixty rubles’ worth of such goods as are taxed and which are consequently dearer (the tax on sugar, matches, kerosene, is an excise duty, i.e., the manufacturer pays the duty before placing the goods on the market; in the case of vodka, a state monopoly, the State simply raises the price; cotton goods, iron and other goods have risen in price because cheap foreign goods are not admitted into Russia unless a heavy duty is paid on them). Of these sixty rubles twenty rubles will constitute the tax. Thus, out of every ruble of his income the poor peasant will pay ten kopeks in indirect taxes (exclusive of direct taxes, land redemption payments, quit-rent, land tax, Zemstvo, volost and mir taxes).

The rich peasant has an income of one thousand rubles; he will buy one hundred and fifty rubles’ worth of taxed goods and pay fifty rubles in taxes (included in the one hundred and fifty rubles). Thus, out of every ruble of his income the rich peasant will pay only five kopeks in indirect taxes. The richer the man, the smaller Is the share of his income that he pays in indirect taxes.

That is why indirect taxation is the most unfair form of taxation. Indirect taxes are taxes on the poor. The peasants and workers together form nine-tenths of the population and pay nine-tenths or eight-tenths of the total indirect taxation. And, in all probability, the income of the peasants and workers amounts to no more than four-tenths of the whole national income!

And so, the Social-Democrats demand the abolition of indirect taxation and the introduction of a progressive tax on incomes and inheritances. That means that the higher the income the higher the tax.

Those who have an income of a thousand rubles must pay one kopek in the ruble; if the income is two thousand, two kopeks in the ruble must be paid, and so on. The smallest incomes (let us say incomes of under four hundred rubles) do not pay anything at all.

The richest pay the highest taxes. Such a tax, an income-tax, or more exactly, a progressive income-tax, would be much fairer than indirect taxes.

And that is why the Social-Democrats are striving to secure the abolition of indirect taxation and the introduction of a progressive income-tax. Of course, all the property-owners, all the bourgeoisie, object to this measure and resist it. Only through a firm alliance between the rural poor and the urban workers can this improvement be won from the bourgeoisie.