Taxes and Taxation in India: An Overview

 

Why taxes are required?  Any Government needs resources to run the administration of the nation. Taxes are levied since the history of the administration began with the rule of kings. It's a system for collection and distribution of the surplus held by the rich to the poor in the society. It also aims at the development of the infrastructure and investment in the welfare of the citizens. However, a country' s progress can be gauged by the efficient and effective administration rather than by the quantum of taxes collected from its constituents. There are countries that levy the taxes in all the possible ways but spend them unproductively for populist schemes keeping the vote banks alone in the focus and a part drained through corruption. No tax shall be levied or collected except by the authority of the law of the country. 

Types of Taxes: Based on who levies them, taxes are classified as Central, State and Local government taxes. Depending on the timing, they can be Retrospective, Immediate, and Prospective taxes. Again looking at the method of taxation, they can be grouped as the direct and indirect taxes. The one affecting a person directly like the Income tax and Sales tax is known as the direct tax. When the tax produces an indirect impact on the citizen such as Customs duty, Service tax, and Excise duty, it is an indirect tax.

Is the purpose of taxation served? From the cradle to the cemetery, every citizen pays taxes of one kind or another. Whether the service is rendered or not, tax has to be paid. Sometimes, Water tax is collected even before the concerned authority lays the pipeline and the water flows to the households. A person or business pays a range of taxes for the education, land, house, water, production, consumption, entertainment, profession, sales, service, income, expenditure, profit and wealth. The non-payment or delayed payment of any tax will attract another burden in the form of interest and penalty that may include the seizure of the assets and/or imprisonment. In other words, government taxes everyone removing the distinction between the poor and the affluent. 

Every government comes up with a new possible tax while the end use of the existing taxes remains a big question mark. The British regime levied it in their colonies for filling the coffers of the empire. The independent nations now administer the same taxes in all possible ways by the name of augmenting revenue to the government, but the rulers enrich themselves to live as the modern kings each nurturing their own groups and factions. 

A clean and efficient government will levy fewer taxes, but provide more welfare to the residents of the country.

Author Mohan Thulasingam is an Ex-Banker and Freelancer. Read more on practical and useful ideas for happy life at his site www.mohanspage.com