DISCREDITING AND TAXING THE RICH WILL KEEP US POOR

 

This is a very unique habit of our sub-continent; we always discredit the rich and blame them for all our miseries. Post independence, with shameless socialism inflicted upon us, we have been groomed to grudge the rich and assume that their wealth is ill-gotten. Successive governments to have victimized them with atrocious taxes, and after taking their tax money they have mostly wasted them and so we still remain ‘developing’ countries. Japan and Korea who started the race with us are now icons of financial success but we still remain in our poverty wonderland. We think rich are evil, profit is a sin and we must distribute our national wealth evenly irrespective of our talent and worth.

Nobody is making a case for the Vijay Malyas, Nirav Modis and Mehul Choksis of this world. They are cheats and the law should come down upon them like a ton of bricks but to hold a case against the luminaries of industry and to burden them with unpredictable taxes and penalties which drives daring entrepreneurs to commit suicide (remember V.G. Siddhartha of Café Coffee Day) is no prescription for industrial boom. Have you ever wondered why politicians are considered as nation builders and not industrialists like Tata, Birla, Reliance, Singhanias and Dalmias? Why are industrialists never considered for Bharat Ratna, when they are the ones creating the 'ratna'(treasure)?

As per Forbes magazine and Google Wikipedia Adar Punewala is 10th richest Indian ! The left leaning media is now flooding us with messages which say that he is marketing his vaccine at a huge profit per dose and taking advantage of his monopoly. They are up in arms against such profit. It is exploitation of the poor so that the rich can get richer they cry! 

There are many problems with this line of thinking.

1. It is not a crime to be rich

2. Profit is not evil. If businesses fail to make profit how will they spend in R&D and how will they invent newer goods and services?

3. If businesses do not make profit then how will they expand and employ more people? How will the problem of unemployment be solved?

4. It is the job of the government to subsidize the vaccine not Mr. Poonawala's

5. Mr. Poonawala is surely paying taxes on his profits, so why hold any grudge against him?

6. We have not yet been told by the government the agreement it has reached with Mr. Poonawala in terms of pricing of the vaccine. All discussions are on the basis of conjectures and theories propounded by the left leaning thinkdom.

7. The crab mentality of pulling down a successful individual or institution into the mud and sludge of mediocrity will not let India shine. These are rare islands of excellence in the ocean of mediocrity, let us leave them alone to prosper. They will provide vaccine to the entire world and make us proud.

In our lifetime we have seen a gradual shift in our Indian society from shameless socialism to shackled capitalism. It is the breaking down of these shackles is what is termed as 'economic reforms'. We has the first set of reforms in 1991 when Dr. Manmohan Singh, under the able guidance of Prime Minister Sri P. V. Narsimha Rao ushered in a whole new way of life. Endless waiting for a landline telephone connection, a gas connection, a Vespa scooter was soon history and the only available Ambassador car disappeared, being replaced by a world of choices. Indian businesses were encouraged to compete with the world's best and competition improved quality and performance. So many people got employment and so many families were pulled out of poverty. Then why did we, as a nation, remain timid and our tentative baby steps in this path of reforms did not grow into confident long strides?

The license raj was not completely dismantled and the babus in the governments convinced the politicians that their control on economy by unexplainably complicated and bizarre taxes was mandatory. So even when with a comfortable majority in Parliament late Sri Arun Jaitley floated the GST it was in multiple slabs and extremely complicated. The theme behind this was typical sarkari babu thinking - don't make it simple, if a common man can understand it then what will remain for us to do? I will give you just one example and you will understand the babu logic - the popular start up ID Fresh Food is in the business of ready to eat foods like rotis, chapatis, parathas and batters of idli and dosa. They were selling roti, chapati and paratha all at 5% GST. A smart babu of tax office had a brainstorm and slapped 18% GST on paratha because roti and chapati are flat bread but paratha is not! It is layered bread. So true to the sarkari babu culture our multipurpose babus are now turning into gourmet chefs only to invent new ways of taxing people. 

Taxes have to be simple and they should be less, only then we can achieve maximum compliance and aspire for a 5 trillion dollar economy. In this connection the 'sin tax' on 5 star hotels, beverages, air travel, comfort goods like air conditioners, plasma TV, SUVs are also bizarre. Why do we tax them so harshly, when it is actually counterproductive?

Let me tell you why, and for that let me use the '5 star hotel's as my model. A 250 room 5 star hotel in my city generates direct employment for around 500 people - waiters, housekeepers, receptionists, concierge staff, cooks, chefs, managers, clerks and a host of others. Then the gym, the gift shops, the spa, the swimming pools, the gardens all has hotel employees. The hotel also generates indirect employment in ancillary areas- it buys beds, linens, furnishings, rugs, carpets, furniture, air conditioners, cutlery, electrical appliances and fittings. It also purchases vegetables, meat and poultry products, fish, dairy products. It also outsources work to dhobis (washer men), security agencies, plumbing agencies and safai karmacharis (cleaners). All these generate income for farmers, construction workers, manufacturers, artisans and many skilled, semi skilled and non skilled workers. Our 5 star hotel also generates foreign exchange from rich overseas visitors and this has a direct bearing on our FDI. 

Now if you tax these hotels to death it will attract less customers and all those whose income is dependent on the hotel will suffer and remain poor. If a visitor feels that the hotel is too expensive he will drop the idea of his visit and spend his money in some other country. So this is a classic example of how high GST is keeping us poor. I can take so many other examples like expensive cars, airfares, real estate, breakdown their employment opportunities and tell you how we can get our economy up and running only if we give up the idea that being rich is a sin, and they must pay taxes to absolve themselves. 

As the Honourable Finance Minister prepares herself to present perhaps the most important budget of our country she must make all efforts to see that the rich and upper middle class should be encouraged to spend more. Our economy is demand deficient and she needs a budget that can create demand. Once the rich spend, the poor will get employment and prosper and more people will move up the value chain. Then more people will buy homes, vehicles, TVs, refrigerators and air conditioners and then even more people will get employment. This is the chain reaction which she has to start. But if she keeps the GST high and complicated the luxury items will remain out of reach of consumers and no new demand will be created and India will remain poor.

Let us decide on a list of objects that are tax exempted and on all the remaining ones let us have at the most 2 tax levels 5% and 12%. This will simplify the tax system and surely improve compliance. Madam Finance Minister must remember what the former British Prime Minister Sir Winston Churchill once said “A nation trying to tax itself to prosperity is like a man standing in a bucket and trying to lift himself by the handle.”

When the upper and upper middle class will find goods and services affordable they will spend more, increase demand in the industry and fire up the productivity engine.  This in turn will generate employment, which is the need of the hour. God bless Mr. Poonawala, may he open another vaccine manufacturing plant and give employment to more Indians and make India proud.