25 June, 2021

'The Really Rich Want Income Tax'

Surjit S. Bhalla contends income tax has has outlived its utility for revenue maximisation in developing countries like India

Jitender Gupta
'The Really Rich Want Income Tax'
outlookindia.com
-0001-11-30T00:00:00+05:53
Econometrician Surjit S. Bhalla happily courts controversies to debunk economic myths perpetuated by the establishment and government-friendly institutions. Here he contends that income tax has outlived its utility for revenue maximisation in developing countries like India and the only way out is to have a VAT combined with a consumption tax. Excerpts from an interview:

What about a scenario where there is no income tax...
That’s not a bad idea. Why do we have taxation? Partly to provide public goods like unpolluted air, good roads etc and partly for the greater good of redistribution. Since we don’t have enough money for it, we try to maximise revenues, especially through income tax. I think a better idea is to have the government rationalise its expenditure. Income tax especially is a highly inefficient way to maximise revenue because it’s coercive; it basically squeezes the salaried people, and encourages evasion of all kinds possible. But income tax continues because the really rich, who get away with low declared income levels and high...

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