Reflections on the global economic crisis
Excerpts from the Op-Ed page article by Justice Markanday Katju of the Supreme Court of India published in today's edition of The Hindu. (This article is based on Justice Katju's speech, ‘Global Economic Scenario – Role of Tax Professionals,’ given at the National Tax Conference at Varanasi on March 7, 2009). Worth reading the entire article here.
In a country like India with its immense poverty and income disparities, the current tax rates seem inequitable and unjust. The maximum rate of 30 per cent for all income over Rs. 5 lakh needs to be reviewed, and a more realistic sliding scale of income introduced for those in higher income groups. It is absurd that the income tax rate for a person making Rs. 5 lakh or Rs. 100 crore a year is the same.
On top of this, those who play the financial markets are not required to pay any taxes on long-term (12-month) capital gains or on dividends, making the Indian financial market perhaps the most tax-free in the world. Even for short-term gains, unique tax exemption vehicles (via Mauritius and so on) have been ingeniously evolved. It is rules and regulations like this, specially crafted for the rich and affluent, which are increasing income disparities.
The Indian situation is that while we have increased the number of billionaires, the poor have become poorer and even the middle class is finding it difficult to make ends meet because of rising prices. This could lead to widespread social turmoil and social disturbances. It is unfair to the vast masses of our people and it will not be tolerated much longer.
Society owes subsistence to all its citizens either by enabling them to work on a reasonable wage, or ensuring a livelihood to those unable to work. The great French thinker Jean-Jacques Rousseau observed in his Discourse on Inequality: “Nothing can be farther from the law of nature, however we define it, than that… a handful of people be gorged with luxuries while the starving multitude lacks the necessities of life.”
In Maharashtra, hundreds of thousands of farmers have committed suicide and are still doing so, while one industrialist is reported to have built a 40-storey building for his residence. This state of affairs cannot continue much longer.
Unfortunately, most people are silent about this terrible plight of our people. Those who should be speaking out are mostly beneficiaries of the present system and hence do not want to disturb it. This is the time for patriotic intellectuals to break the pattern and speak out. They must study economic theory and read the books of economists such as Adam Smith, Ricardo, Marx, and Keynes, or at least some commentaries on them. This will enable them to better understand the economic crisis, so that they can propose measures to alleviate it.
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