Letter to BS: The surcharge is an illogical way of raising govt revenue

The government expects to get just Rs 2,724 crore from the surcharge levied

Dhiraj Nayyar in his article “Cake or taxes?” (July 18) argues for bringing down the total tax liability of the very rich and super-rich (earning more than Rs 2 crore) in India, from 39 per cent and 42.5 per cent to 30 per cent, on par with the corporate tax. I agree with the first part but not the latter. The surcharge, being a tax on tax, is an illogical way of raising government revenue and in respect of the richest has been going up every year beginning with 10 per cent in 2013. It is unethical also because it is a devious way of depriving the states from their share of the taxes.

The government expects to get just Rs 2,724 crore but its adverse psychological effect will be much more — it may induce the affected to find legal (forming limited liability partnership) and illegal (tax evasion) means to reduce the liability. Also, there are doubts being raised about its negative impact on foreign portfolio investors.

However, should tax on individuals be on par with corporates? Corporations spend a part of their profits on discharging corporate social responsibility; individuals may not. Even as they add to their income, corporate activities provide employment to a large number of job seekers, contribute to GDP growth significantly and produce goods and services that by and large benefit the society. Individual entities may not match these gains to the nation. Besides, there is likely to be a high concealment of income in the case of non-salaried assesses.

Y G Chouksey, Pune
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