Theo_Fidel wrote:India is different because agricultural income/expenditure is completely untaxed.
That would be one reason, but I suspect wont be a big one. Simply because there is so little of national income in agri (~14%), and bulk of the farmers would not qualify under any tax bracket.
I think the general axiom that India's tax-to-GDP is low is intellectually lazy. Tax-to-GDP is a function of per capita income, adn we are still a mdoest 1600 dollar PCI country. However, it is also a fact that a lot of money and income in India is concentrated (our Gini has gone up in the last few years), and hence a lot of income can be taxed. Unfortunately, not too much robust intellectual frameworks have been analysed around this question.
The new found love for "tough laws" to dig out black money is taking us back. Black money is best brought in by intelligent policy, not by threatening people.
The comment at that point was more respect to the sheer number of income tax payers. I just pointed out that 50% of Indians are exempt from being counted at all.
I don’t disagree with the rest of your post on agriculture. One should remember that due to the legacy of the EIC, agriculture tax would set the whole nation on fire. Not worth the hassle, as GOI has repeatedly decided. There was a time when agriculture was 60% of GDP and GOI was sorely tempted to go after it.
At our income level India is quite a fairly taxed nation. Though I would also say, if you owe taxes, cough it up. Nation definitely needs it to pay bills. We need to remember that back in 1930 when USA was at our development level, total federal tax was 3%-6% of income and total tax was less than 10%.
Also agree on getting carried away with a war on the rich. The rich have always avoided taxes because they have the resources to do so. They have a tendency to comply if you can demonstrate to them we are in this together.
At the same time no society can tolerate a highly skewed income distribution. Take one item, the allocation of resources. The rich have a tendency to spend their gains on $100 million dollar homes, $50 million yachts, gulfstream jets, etc. The majority of this sort of spending is wealth destruction. Sure the rich invest, etc but the majority of the wealth is guaranteed to be squandered. You can see it from the fact that no rich family cash hoard survives 2 generations. Take a look at Rs 1 Billion on antilla, this is wealth destruction you are seeing folks. The middle class spend on education, water, security, roads, etc, this tends to be nation building. You can see what income skewing does to a society in America. Because 50% of income goes to the 1%, the discretionary spending on education, roads, consumption, falls on the remainder of folks who only make 50% of income. Obviously this is not sustainable long term, but try telling that to the Mitt Romney’s who pay 0% tax while building car elevators. Wealth destruction of the worst sort. The rich need to be bankrupted frequently. In the past WW1 & WW2 did the job for us, going forward…