Transparent tax system must: Raghuram Rajan - Moneylife

Transparent tax system must: Raghuram Rajan - Moneylife


It is comforting to know
that a healthy debate is on, about the Indian tax system. The ‘Take as it
comes’ approach to revenue(read taxes) and ‘Pay as you go’ approach to
expenditure which is a legacy of the pre-independence governments need a quick
re-visit. Though government finances cannot be compared to accounts of banks or
companies, if the arrogance of ownership settles down in the mind as a ‘right
to do anything, come what may’, we may not need an astrologer to predict doom.
Escape routes are many to
compensate for the dwindling savings rates. If trust is restored, the
accumulated wealth in the form of gold and jewellery as also hidden savings in
the form of unaccounted money and ‘undervalued’ assets will surface which will
be available for investment. The short-term measures like dipping into the
reserves of central bank and selling ‘family jewels’ for meeting fancy targets
of modern economic planning(showing a lower fiscal deficit) without ensuring
corresponding reduction in debt or increase in productive assets can be
suicidal, in the long term.
The earlier example was
when GOI discontinued pension facilities for future employees in 2004, to avoid
funding of pension liabilities which were being met (and are even now being
met) on a “Pay As You Go” basis. Such camouflaging may not work always.
Sooner the government
looks at its financial planning with a prudent ALM approach, it would be better
for the country.

G Warrier,


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