Tax in India

Hi everyone

The new budget for India is out now. I will surely make another post about this sometime soon, but here I will just give a quick write up regarding tax.

According to this article in BBC, only 3 % of people in India actually pay tax! Some of my colleagues have stated approximately the same figures before, so I guess it is close to correct.

How can a society work if only 3 % pay tax you might ask? I think there can be (at least) two answers on this question. One can be the simple: “it does not work”. The other one can be: “it work the Indian way”. Let me take the first one first. According to what I would call Norwegian standard, or maybe I should rather say Norwegian system, it can be tempting to say that the society doesn’t work. How can it be that the roads are full of potholes in a city like Mumbai? How can it be that you still have to fill out a form to do the simplest small task? As a Norwegian, I easily get frustrated by things like this, and it is easy to then say that this does not work!

But on the other hand, it does work! No, the roads might not be good. But the society work here. It can be very tempting to point at the black market, and corruption and things like that, but I can also easily see it from a different angle. This is a country where you don’t expect the government to fix things for you. They have tried for a number of years, but it hasn’t really made a lot of improvements. Why pay them if they don’t do anything for you anyway? Why don’t you then rather pay the people that make things to work? In a previous blog post, I wrote about the fine I got from the police for not having a valid pollution certificate in my car. Yesterday I went to a place to take a control and get a new certificate. These controls are quite simple. There are some cars parked at many places with a notice saying that they do PUC. I have done this before, and know quite well how this works. But the poor guy who were in charge of the car where I stopped couldn’t a single word English. What did he do? Instead of making the control of my car, he just gave me a new certificate, and I paid the price for it. That works doesn’t it?

The example is maybe a too simple one, but it clearly shows something about how things work here. If you want to have a new road, you don’t expect the government to build it for you. If you can afford it. If not, you don’t get a new road. As simple as that. And by most people not paying tax, it reduces the price on a lot of the things you can buy here. There is a small shop next to where I live where I can get my clothes washed and ironed. I quite honestly doubt if these people pay tax. I’m not even sure if all the young kids who work in the shop can read or write. Most probably they sleep in the shop, eat in the shop and do everything there. If they should go to a tax office or something like that to pay, it would mean a lot of hassle for them. And it would raise the price of their service, which again means that the person next door who runs a beauty shop would not be able to pay for the service.

This is what I mean when I say that thing works the “Indian way”.

Talk to you soon

Karsten

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