India: Taxation’s Fatal Neglect?

How one-sided has India’s conversation on its government finances become. It is all about spending, spending, spending. For the United Progressive Alliance (UPA) government, of course, elevated spending, subsidies and redistribution were sacred objectives. But the opening salvo of the great hope of Indian democracy, the Aam Aadmi Party (AAP), was to provide free water and power to the not-so-AAM citizens of Delhi, who already enjoy the highest living standards in India. Many of the Bharatiya Janata Party (BJP) governments in the states have been trying to out-Congress the Congress on a range of subsidies.

The sobering fact is that at the next election, the three main choices on offer are: more of the same spending (Congress); more spending, less corruption (possibly) but also more economic nationalism (AAP); and no less spending, but possibly more market-based reform (BJP). And now, as if to confirm this obsession with spending, a proposal under serious consideration by the BJP would seek to eliminate income taxes altogether.

Revenue and Tax

We must be clear. In poor and unequal India, the level, type, quality and sustainability of spending are vital issues to debate. But the obsession with spending has crowded out discussions on spending’s Siamese twin: revenues and, more specifically, taxation.

 

Read the whole article here.