Rationalizing taxes

Vehicle taxes

The government has once again proposed to increase taxes on a list of non- essential commodities going by what the Finance Minister (FM) had presented in the National Assembly last week.

Even if it is a little too late, the proposal is timely. Revision of taxes is inevitable given the prevailing situation of our economy especially the shortage of Indian Rupee. Our balance of payment with India is only widening even if we are devising numerous strategies to sail over the situation.

The revisions will therefore definitely ease government’s financial situation.

But how it would is yet to be seen? A closer examination of the tax proposal raise doubts whether measures that are stipulated are really intended to serve the given purpose.

For instance, for vehicles above 1,800cc engine capacity, the tax proposal expounds that a green tax of 40% will be levied in addition to the 45% sales tax and customs duty on such vehicles.

However, what government overlooks here is the fact that import of vehicles above 1,800cc is not the most severe problem. It’s not the reason that is draining out the Indian Rupee and neither the ones causing traffic congestion in the town. There are just a negligible number of people who can afford to drive such cars.

If we look around closely it’s usually the various agencies and departments under the government that has a major chunk of these foreign vehicles. Thus, the FM’s argument that taxation of foreign cars would help the dollar reserves sounds wry.

This is because the government continues spending exorbitantly on foreign cars. Therefore, isn’t it time government should opt for an appropriate procurement system that will also help cut transportation cost?

Another surprising fact is that new taxes wouldn’t be applied to cars imported from India. While the FM expounded that Indian–made vehicles falling above 1,800 cc would be levied taxes, we know that almost all the cars that are presently imported from India are far below 1,800cc.

Some quarters of the people contended that taxes were proposed for petty things such as refrigerator (10%). They reasoned that it is a household necessity than a luxurious item, and that the new taxes were proposed just for the sake of imposing taxes.

Few can’t help but draw comparison to Pasakha industries that enjoy government subsidies and also have a detrimental impact on the environment. And their arguments seem genuine too as the whole area is covered with billowing dust and smokes from the factories. An impact of a household refrigerator is nothing compared to the exhaust pollutants from one industry.

While imposing new taxes isn’t a bad idea per se, the tax proposal must be rationalized in a more sensible manner.

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