Apropos the report “Valuing good taxes” (January 12), there is a serious flaw in the definition of “luxury” goods. Mobiles were termed a luxury as one of the six conditions for the mandatory filing of income tax return. By this standard, almost the entire Indian population would come in the “elite” category. On the other hand, water, the most basic necessity, is also a luxury, depending on when, how and in what quantity it is used. The basic concept of indirect taxes is counter-productive because it allows the government to first take from the poor and then pay back in the form of subsidies. Both these processes promote corruption and graft. We are obsessed with the faulty notion that direct taxes are taxes on “income or profit”. This view does not distinguish the productive use of money from wasteful or lavish expenditure. Taxes and subsidies can easily be replaced with a progressive and direct “consumption tax” and cash support. By doing so, all forms of indirect taxes and subsidies can be eliminated. With the advent of information technology, a move in this direction is not only possible but also necessary to change society’s socio-economic structure and tackle problems like corruption, under-development of human resources, inequality and so on.
Satish Kapoor, Pune
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