"Pricing & Taxation Policy - For Fuels & Other Enablers"

"Ideaz on - PRICING & TAXATION POLICY - FOR FUELS & OTHER ENABLERS"
By P.T. Choudary - Chairman, Institute for Democratic & Economic Affairz (IDEAz)

Quotations for consideration:

  • “If you drive a car, I’ll tax the street. If you try to sit, I’ll tax your seat. If you get too cold, I’ll tax the heat. If you take a walk, I’ll tax your feet.” – George Harrison… on the attitude of a Tax man.
  • “Governments view of the economy… If it moves tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” - Ronald Reagan .

KEY CONCEPTS:

  • Objective of Taxation:

It should be the aim of any Government to arrive at a pricing and taxation policy for all Goods & Services that takes into account the difference in the nature and purpose of each and, is directed so as to equitably deliver the maximum benefit to the public and, not just to generate the maximum, immediate or short-term, tax revenues to the Government, even if it then claims to use such revenues only for public good. A benefit that can accrue to the public directly is far more equitable and effective than that which is first pooled into the Government’s ‘sticky’ hands and then distributed. The Government’s need for tax, like its bureaucracy, will otherwise be ever growing and there exists a strong and undesirable correlation between them.

  • Services vs Goods:

Consumers tend to spend relatively less on goods and more on services as their incomes rise. Once people have met their basic needs, they tend to want better medical care, transportation and communication, information, recreation, entertainment, financial and legal advice etc. Services including design, flexibility, innovation and smartness are steadily substituting for materials in our manufacturing, exports and trade.

  • Categorization of Goods & Services:

All types of Good & Services cannot be considered as being similar. They fall under three categories. The first category includes those that are consumed or used as end or final products itself divided into ‘staples’ and others, while the second category includes those that are intermediate products & services consumed in the production of such end products and finally, in the third category are the enablers, those which act as catalysts for, or are the essential inputs for, increasing productivity and generating greater employment.

  • Methods of Taxation:

The proposed General Sales Tax (GST) system is a very efficient, effective and equitable system for the first and second category of Goods & Services. The more one buys or consumes such items, the more one pays as tax. The rates of such taxation can be used to direct consumption in the appropriate direction in case of addictive and health effecting items which result in a greater burden on society. The tendency to use the tax policy to affect other ‘flavour of the day’ demands (to modifying eating habits or to enforce environmental conditions etc) should be strongly resisted as it may otherwise soon lead to cascading demands for other

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