In case you stumbled upon this article first I would request you to read The Real Problems of India: The Beginning to understand the story so far.
4. Government Jobs
India is a huge nation and before the rise of the private sector in last few decades the biggest industry was the government. The time has proven that Indian government is a failed organization still operating with a maximum operational cost to its clients and that are the people of India. I don’t want to ignore the good work done by the government but it is so minimal as compared to the damage done that it could be ignored. The people working in the government sector consider themselves as superior to their employers, civilians of the country. The efficiency of government offices is negative or zero. The problem is the structure of the system, government employees do not have the fear of losing their jobs which is very important for people of India to work as most of Indians work for having a secured life, which is being provided by the government jobs. The youth of India desire one thing only and that is to somehow clear the exam for any government job and then live a happy prosperous life. Whereas the private sector is working more efficiently in India as the jobs are more for people with performance. The government employees don’t have to bear any consequences for delay or no work at all. I’m sure that if the government changes its policies about the jobs being provided by them to make it more performance-based, all the government employees will take the streets and march against the government. That brings me to my next point.
5. The mentality of the general population.
Note: Before I go on with this topic I just want to say I love the people of India and they are good people but there are few bad apples too, so if anyone feels offended please remember I’m not talking about you but the bad guys.
There is a lazy attitude in the culture and people are often known for not valuing time. Most of the time people have the attitude “Someone will do it” but nobody wants to be that someone. People want the change and when changes are made the same people complain. People of India are more happy to have freebies rather than working hard. India is called the innovation hub. There are Indians who are actually working hard to achieve success but the general population is happy with the low quality of services and cheap alternate techniques called “Jugaad”. One example I can come up with right now is Bollywood and Indian music Industry, there is zero originality in the movies and songs. So they are basically cashing in on other artist’s work. India has the biggest movie industry in the world producing around 2000 movies a year. Mafia is involved in the entertainment industry as it is easy to evade taxes and money laundering is easy. This is why Taxation becomes a part of the problem rather than a solution.
6. Manage Taxes.
Nobody in India wants to pay taxes and everyone is always looking for ways not to pay taxes. This is due to the fact that corruption in India has been flourishing for many centuries. The biggest scandal I can quote is the telecom scandal by minister Andimuthu Raja of worth $40bn (£24.5bn). So people do not feel secure to pay their taxes to the government. Recently one of my friends said “Why shall I pay the government more, when I pay tax on everything around me except the air that I breathe. Why shall I pay a government who will not take care of me in case I don’t have a job”. This kind of insecurity also pushes the common people to evade taxes and on top of that Indian tax system is one of the most flawed ones. It provides enough loophole for businessmen and rich to save the tax money. Recently the government of India has applied GST as one tax rather than multiple tax system India had for a long time. This GST is supposed to help Indian tax system and benefits the economy, people and ease of doing business. Let’ see the basic problems with Indian tax system.
a. High Rate of Direct Taxes
India is still one of the highly taxed countries, even though the direct tax has reduced from 50% to 30%(plus 2% surcharge). The problems with the high direct tax are tax evasion and avoidance hence the yield of direct taxes in India is very low.
b. Low Contribution of Income Tax
Per capita income in India is very low and the exemption limit is high. People also try to reach the exemption limit to avoid paying income tax by investing in government approved insurances, NSCs, units of UTI, of public provident fund etc. According to a survey conducted in 2013, only 1% of the Indians pay their taxes.
c. Double Taxation of Dividends
This particular problem is the leading cause of India being difficult for business. Companies pay corporate taxes on their profits and then the dividend is divided among the shareholder which is further taxed as personal income tax.
“Dugna lagaan dena padega” quote from movie Lagaan.
d. The absence of Agricultural Income Tax.
With all the poor farmers committing suicides and government waive off their loans it is difficult to even talk about taxing the agriculture income but it is important. There are a lot of rich farmers and big agricultural industries across India who are misusing this tax benefit. So it becomes important to revise and reintroduce the agricultural income tax.
e. Widening the Indirect of Tax Net
Indirect tax is the biggest source of revenue for the government. The decline in revenue from direct tax and rise in indirect tax is not good for the poor people. Indirect tax is the tax we pay for food, transportation, goods, and services etc and direct tax is the income tax, corporate tax etc. A box of bread cost the same for rich and poor but the poor pay more tax due to low income while the rich pay very less as per the income. This widening between direct and indirect tax makes life easy for the rich and difficult for poor.
7. Control corruption
As we discussed in the previous problem that one of the most prominent causes of people not choosing to pay direct tax is the distrust caused due to Corruption. No country is untouched by Corruption but every year Indian politicians face corruption charges without strict consequences which is why people have almost no faith in the government with their money. The problem of corruption is not just on the political level but it has its roots in the culture that is why it is difficult to uproot it. Indian culture is so deeply infested with corruption that it doesn’t seem like a crime but more like a regular process of doing things. With the rise of social media and social rights awareness now more people are coming together to fight against it. The current government is also trying to fight against corruption but the method used far had adverse effects on the economic situation of the country, for example, demonetization. The corruption may not seem like a grave issue but it directly helps in weakening the growth of the country. This is where the whole country needs to change and government alone is helpless. Yes, of course, the government can come up with strict laws as China or other nations with dictators or communist approach but that will not reflect well on Indian democracy and the capabilities of people as a nation. The whole nation needs to come together as one like they do against terrorism, which is another problem India is facing for a long time.
To read the next part of the article please go to The Real Problems of India: Part2(coming in two days).