19 Nov 2007

Indians are the highest tax payers in Asia ???



I came across this article today which claimed that Indians are the highest tax payers in Asia. However what it did was to just compare the tax rates of the salaried class, compared with jurisdictions like UAE (which by itself is a tax haven, given the low tax rates there), Russia, Hong Kong, Taiwan, Singapore, etc.

It provoked in my to find out the reasons why...?

Just because of the fact that the personal income tax
rates in India are on the higher side, does that mean that we automatically become the highest tax payers? Like what happens to those tax planning measures that we get under the Act itself? What about the reduction in rates you get when you translate you income into [long term] capital gains? And finally, is the salaried class all that comprises India? What happens to the business income (which covers a substantial number of people given the fact that so medium and small-scale business enterprises are spread across the country), income from house property (covering those who make their living on the rent they get from the property they lease out), income from other sources etc., which comprise of a huge share of income and have deductions and tax-incentives inbuilt in them?

I think the proper way to find out the tax payers would have been to compare the 'Per-Capita Tax Collected' rather than just drawing conclusions from the basis of differences in tax rates.

For example, Pakistan imposes the similar rate of taxes on individuals' and corporations' incomes. Are both the highest tax payers in Asia. No. The answer is not that simple. For analyzing this, one needs to take into account the level of contribution individual tax-payers have in the national tax collection figures. What is the per capita payment of tax in the country and how is it really reflective of who actually fills in the national income tax coffers? i.e. is it the companies, individuals or foreign investors who bear the brunt of taxes???

Thus it seems that a mere reliance on the rates of tax to conclude as to who pays the highest tax would be absurd as that conclusion would be based in ignorance of the actual ground realties [ever heard of Section 80 and 80G and 80L etc. and the series of exemptions provided there ???] and the actual tax collection figures...

2 comments:

Hyderabad Masti said...

What BULLSHIT you talk about per capita and all ??? Give job to everyone in INdia and then talk abt per capita.
Corruption of Govt / political leaders needs this heavy taxes ..

Tarun Jain said...

wow, what a good thing to say.
those who work should now also bear the brunt of those who are corrupt and do not work.
Makes amazing sense men. Hats off to your brainy ideas.