At the press meet organized to release the white paper on Tamil Nadu’s fiscal status, Finance Minister PTR Palanivel Thiaga Rajan on Monday said that there was an overall dip in revenue from taxes. The minister also stressed on the need for revising taxes and the social significance of taxation in a welfare state.
Emphasising the importance of taxes, PTR said that he wishes to register at the press meet what he believes is the foundational principle of taxation. “Some people talk about ‘zero taxes’, it is a meaningless phrase. The philosophy behind taxes is to take a fair and equitable share from businesses that do well and use the funds for the benefit of the poor, for ordinary people and for public welfare.”
He went on to add that zero taxes benefit the rich, and not the common man. “People have been talking about zero tax. Who pays the tax? In any tax-just state, the most rich, and the biggest companies pay about 50-60%. In countries like America, the top 1% of the taxpayers will pay 50% of the tax collected by the state. That is just. Yes there are other loopholes and laws may not be followed properly, but when we talk about zero tax, those being benefited are not the common man, not the poor people. Rich people is to whom zero tax is beneficial,” he said.
He added that the amount received by direct tax has been reducing, and indirect tax has been going up.
“If I was to give you another example, the Union government in the last 4-5 years - income tax that rich people and corporates are supposed to pay - the proportion has been continuously reducing and in effect, indirect tax, GST, petrol etc are all increasing and their income comes from the common people. Who does this benefit? It benefits corporates and rich people, but not for society,” he added.
The white paper says that there has been a decline in State Own Tax Revenue from 8.48% in 2006-07 to 5.46% in 2020-21. Further, according to the data provided, Commercial Taxes as a proportion of Gross State Domestic Product have also fallen from 5.83% (2006-07) to 5.11% (2015-16) and to 5.8% (2016-17) before the introduction of the GST and has only decreased since, falling to 4.19% in 2020-21. It also states that a more thorough analysis for the decline of SOTR was required.
He said that taxation on motor vehicles, which is much lower in Tamil Nadu as compared to other states, has not been revised in 15 years while both production and inflation have gone up.
The paper also suggests a revision of property tax collection would be easier to “enhance” as compared to State Own Tax Revenue and GST. It says that the primary source of revenue for Urban Local Bodies is Property Tax (more than 50% according to the paper). Though the Tamil Nadu District Municipalities Act, 1920 provides for periodic revisions every five years in municipalities and town panchayats, the last general revision to property tax was done in 2008.
The argument laid out here for revisions is also that enhancing property tax would greatly help Urban Local Bodies making them more self-reliant, given “that Tami Nadu is the most urbanized among the larger states” and that “a large potential for tax collection is left untapped”.
Similarly, PTR’s white paper lays out an argument for the revision of electricity tax, on the grounds that the current system in the state allows “certain categories of buyers are escaping taxation” and others pay far less than in other states.
During the press meet, he said that “If one says there should be no taxes then how is a government supposed to run?” adding that “our belief is to take from the right people either a tax or fee or excise and use it for the public good whether it’s for laying roads or providing drinking water or healthcare or industrial estates.” He further said that in countries like Australia, Germany or in Scandinavian countries that are ranked high in World Happiness Reports “taxes are high, minimum wage is high and education is free, medical aid is free. That is a welfare state.”