Why not make rich farmers pay tax?

The top one percent farmers earn several times more than an average salaried taxpayer

ashishm

Ashish Mehta | January 2, 2019 | Delhi


#india agriculture   #rural distress   #income tax   #agriculture tax   #agriculture income   #farmer tax  
Illustration: Ashish Asthana
Illustration: Ashish Asthana

Before Narendra Modi replied with the now-famous greeting of “Puducherry ko Vanakkam”, a BJP worker was telling him in a party-organised video conference that the government was “only busy collecting tax in all manner and in all ways,”, creating much discomfort to the middle class. But a single-minded focus on taxes may not be a bad idea after all. The government has been relentlessly at work to increase its revenues, so that it has more money on hand to spend – be it on infrastructure or on welfare spending. That is why the two biggest, boldest decisions on the economic front – demonetisation and GST – both relate to taxes. Here is a third bold idea: tax agriculture.

Middle-class people, mostly salaried folks, have long felt that they have been bearing too great a burden of earning for the nation-building. A small upper class always finds ways to dodge taxes, and the larger lower middle class is rightly out of the tax net. Thus, direct taxes are paid by about six crore (or less: not all returns filed result in actual taxes). You could be earning barely Rs 3 lakh, and yet you have to cough up taxes. On top of that, the middle class, as consumers, also ends up paying up a large share of indirect taxes, be it various kinds of cess or the passed-on duties. 

Think

If India wants raise the tax-GDP ratio from about 16 percent to 22 percent, as NITI Aayog envisions, new tax options will have to be explored

. . .

The top one percent farmers earn several times more than an average salaried taxpayer
 

On the other hand, a big class of people make money tax-free. Though agriculture does attract a variety of taxes and the states are free to impose some more, the income from it is free at the central level. Since a majority of the farmers are poor and depend on the vagaries of nature to make a living, the idea of taxing agriculture income seems cruel if not outright inhuman. However, like the personal income tax for the salaried class, a high limit can be proposed so that most farmers continue to be unaffected. 
 
A majority of farmers in India have very small landholding, and those with more than four hectares of land form barely four percent of the total farming families – but they make 20 percent of the total agriculture income.  When an income-tax payer with an annual income of Rs 3 lakh goes to work in a city bus, there are farmers who run a business enterprise equivalent of a small firm. Why shouldn’t they pay for the nation-building? More so, when the government has promised to double the farmers’ income and theirs too will double.
 
In November, NITI Aayog published ‘Strategies for a new India’ with 41 recommendations. A crucial one is to raise the tax-to-GDP ratio. It notes, “India’s tax-GDP ratio of around 17 percent is half the average of OECD countries (35 percent) and is low even when compared to other emerging economies like Brazil (34 percent), South Africa (27 percent) and China (22 percent). To enhance public investment, India should aim to increase its tax-GDP ratio to at least 22 percent of GDP by 2022-23.” The governments so far have explored all avenues to extract taxes, and one of the few left on the menu is agriculture.
 
With right conditions and restrictions, taxing agricultural income can be a the ultimate bold move in the economic arena. It will be a great leveller too.
 
Reality Check
These are the days of the loan waiver: manifestoes promise it, elections are won or lost on it, and parties are in competition to prove that one has waived more loans than the other has. Debating whether loan waivers are good for the economy or not would itself be a bold move. Against this background, can anyone imagine a party promising tax on agricultural income?
ashishm@governancenow.com
(The article appears in January 15, 2019 edition)

Comments

 

Other News

Uddhav Thackeray resigns as chief minister of Maharashtra

Minutes after the Supreme Court ordered a floor test on Wednesday night, Uddhav Thackeray in a televised address resigned as the chief minister of Maharashtra and also as a member of legislative council (MLC). He later drove down to Raj Bhavan and tendered his resignation to the governor Bhagat Singh Koshi

Gig workforce expected to expand to 2.35 crore by 2029-30

The gig economy has arrived in India, as the Covid-19 pandemic has propelled a flexibility of employment. As many as 77 lakh workers were engaged in the gig economy, constituting 2.6% of the non-agricultural workforce or 1.5% of the total workforce in India. The gig workforce is expected to expand to 2.35

How Antyodaya Saral is simplifying everyday life in Haryana

From obtaining an electricity connection to a driver`s licence, ration card, or old-age allowance, delivery of government schemes and services is an aspect of governance that impacts citizens at various points throughout their lives. The Haryana state government provides over 600 such schemes and services.

A blueprint of India’s economic future: From a former RBI governor

From Dependence to Self-Reliance: Mapping India’s Rise as a Global Superpower By Bimal Jalan Rupa Publications, 184 pages, Rs 695 Bimal Jalan, a former governor of the Reserve Bank of India (RBI), has been one of our finest commentators on econom

Carbon neutrality: distant dream or a possible future?

While many countries have been chasing to reach the carbon neutral status, only a few seem to be living up to their pledges as of now. The famous ’Paris Agreement’ of 2015 was glorified and celebrated that finally 196 countries have united with an intent to mitigate and reduce the greenhouse ga

Agnipath: benefits and challenges on the path ahead

The government this week announced the Tour of Duty or `Agnipath` scheme for the recruitment of soldiers in the armed forces. Under this scheme new soldiers will be recruited only for four years. This radical and far-reaching scheme has attracted mixed reactions from various quarters. While some officials

Visionary Talk: Sanjay Pandey, Mumbai Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter