Yes, we don’t pay taxes, we buy services with them. Imagine a war-torn country. Men are slaughtered, women are assaulted, and children are butchered. The poor live in the shadow of the one who rules with no government to support them. And finally, the helpless revolts against those in riches and glory. So, thank the government and the army for protecting the borders or the government providing schemes to the poor for their upliftment. A robust system with a judiciary to protect the people from unjust, a transport infrastructure for our comfort and a community park for our entertainment. Now imagine putting a price on all this. Taxes are the most misunderstood concept in India. Most people don’t understand the importance of taxation laws and often display a profound contempt for them as frivolous laws. Now countries like UAE have free taxes except for a meagre 5% VAT. But then have enough from their tourism. However, this is not possible in India. Unfortunately, not even 5% people file for income tax return. This shows the existence of a hidden parallel economy.
Y’all my $20 tax check hit. pic.twitter.com/xj4cyuBPEO
— Lit As A 20 Foot Christmas Tree. (@OhYeahItsG) May 1, 2019
Taxes and its Structure
Taxation forms the biggest source of income to the Union Government. With the absence of a strong revenue system for the government, deficit financing (printing of more money) in order to cope with fiscal budget, finally hits the common man in the form of rising prices. We have a progressive taxation structure i.e. rich taxed more while poor exempted with the existence of tax slabs. This means a person earning 10 lakhs is exempt from tax for first 2.5 lakhs while 5% of other 2.5-5 lakhs and 10% on next 5-10 lakhs. While the middle-class whine about paying the most, but in reality, they receive more than they paid. Almost all of the pensions and salaries go to the middle class. The middle class utilizes the metros and railways. Now the rich class, even with the tax evasion, they are paying more indirect taxes like the corporate tax (tax collected by company) is the largest tax collected.
The basic and most important assumption of Economics is that an individual is rational. A rational individual always strives for more utility. If with infinitesimal money, we strike a deal with humongous utility, then isn’t that deal worth a shot?
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