From Ancient Past Till Date
Have you ever wondered as to what is it that regulates the society you are living in?? Have you ever thought as to how do you get morsels for your mouth and clothes to wear even if you neither grow food grains nor do you grow cotton?? What is it because of which you get pitched roads to walk, banyan tree to take shelter and cold water to drink while you have to go somewhere distant even if that road is not yours, that banyan tree was not planted by you or your ancestors and even the tap which quenched your thirst didn’t belong to you. Wherefrom does the government get the money to launch chandrayana and all and how does it pay those serviceman?? Where is that treasury of the government??What is it that maintains the equilibrium between the rich and the poor??How exactly does the entire system function?? No doubt its taxes but then how come a single concept be robust enough to regulate the entire species of human being across the globe.
Here’s a simple bottom-up layman’s approach to explore the myths of this common yet uncommon term called “Taxes”. Ever since the beginning of the human civilization people had accepted the hard truth that they cannot live in isolation and that they have to depend on each other even to survive for their existence. This realization coupled with the fact that necessity is the mother of invention gave birth to a unique concept called “Society”. As time passed by and people began to realize the importance of others in the society, a new concept called the concept of a “Welfare Society” gradually began to germinate into the minds of many. This concept of welfare society, which remained virtual unless it was first mentioned clearly in Kautilya’s Arthashastra, envisaged a society where the bottom-line was nothing but welfare and only welfare of the entire society irrespective of any possible adversities. Even though men had a yearning desire to live in an ideal society but Greed, The Unofficial Trademark of the entire human species which always triggered an unending desire to amass as much resources as possible, be it at the cost of anyone’s livelihood also, became the biggest stumbling block in the realization of the so called vision of “Welfare Society”. It was under these circumstances when for the first time the need of a system which could safeguard the interest of each individual irrespective of any constraints was felt for the first time in the history of human civilization and it is this need which gave birth to the peculiar concept of “Taxation”.
Contrary to the belief that wealth and other assets earned by people are levied taxes only in these days, the history of taxation dates back to thousands of years although it was as haphazard during those days as it is organized today. There are evidences that the ancient Egyptians levied taxes to exploit the slaves under them. Caesar Augustus, one of the greatest rulers in the history of Roman Empire passed out a decree some 2000 years during his reign between 27 B.C. to 14 A.D. ago stating that the whole world should be taxed. A clone of the present day tax-system in India was available ever since the ancient past. Ample evidences of the guidelines on the basis of which taxes were imposed can be found out from rich texts of two scholarly works of Manusmriti by Manu, A proven saint of those days and Arthashastra by Kautilya ,the first Prime Minister of the Mauryan Dynasty. Things were almost so organized that there were guidelines as to how much taxes should be levied on people from various sections of the society. The sage in his holy book stated that people should be taxed depending upon their income in that season and there should not be any imbalance between what they can contribute to the society and what actually was demanded from them. It is said that traders had to pay 1/5th of their income in gold and silver and that agriculturists had to pay 1/10th to 1/5th of their total production depending upon how much they produced. Even actors, singers, dancing girls and almost every individual had to contribute to the treasury of the government be it in gold or as food grains or livestock or any such resource. Taxes such as Vartanam, Dwarodaya, yatravetanam were imposed on those sections of the society who dealt in import and export business or earned from pilgrimage etc. Bhadra, Palika, Vasantika etc were taxes imposed on land used for commerce. Sale of liquor was also heavily taxed.All these taxes accrued to the treasury of the government and Kautilya in his rich book says, “From the treasury, comes the power of the government, and the Earth whose ornament is the treasury, is acquired by means of the Treasury and Army”. And it is not far from interpretation that it is from this treasury that the government maintains an equilibrium in the state and safeguards the people in days of penury caused by any natural catastrophe or any intrusion by the foreigners or any other such threats.
Switching over from those trends in tax-system of the ancient past, the first significant work which formed the basis to the present-day regulations in India was the Act II of 1886. Prior to this also there were guidelines in 1960 which extended up to 1965 to meet the expense of 1857 mutiny and also in 1877 to compensate the disaster of the 1876 famine. However the most significant achievement was made in the year 1922 which was formulated on the basis of recommendations of All-India Income Tax Committee which redefined the very concept of direct tax laws because of fact that the law henceforth vested all the powers to collect these taxes to the Central Government and thus leaving those provincial governments with no such privileges. The next significant achievement was made in 1961 which came into effect from 1st of April 1962 with the concept of revenue audit and extended to the whole of India. However reforms up to 90’s lacked in rationalization of thoughts and were mainly based on “inward looking growth substitution” based on Soviet Model Of Development and ended up fatal to the economy especially in the wake of rising inflation of early 1990’s. It was in 1991 when the govt. came up with major economic reforms based on “East Asian Miracle” with the focus mainly on Exports and globally connected development strategies as was practiced by Japan. Malaysia, Singapore, Thailand etc with the sole aim to achieve a higher growth rate. The initiation of such measures were taken with a mission to achieve the accelerated rates of growth with more competitive efficiency of economies in the global marketplace. The most recent development in the tax system had been introduction of three tier Value Added Tax from April 2005 to cover 550 goods to be imposed at the point of sale. Thus the transition of the Indian Economy from the days of ancient past to the present day system has been an odyssey. Thus the tax system today is much more planned and rationalized yet irony is this that we have till date not achieved the dream of that welfare state of an ideal society and still a major chunk of the mass perish in poverty and penury. Need of the hour therefore is to come out with some practical solution and to do that we have to first understand the basic framework of the entire system.
The three-tier federal government of India has a three-tier structure for levying taxes namely by Union Govt., State Govt., and various local bodies. The Union govt. levies taxes like: Tax on Corporate Income on companies resident in India and trading worldwide, Capital Gains Tax on sale of assets, Personal Income Tax on annual income of an individual(Except on agricultural income), Tax incentives on corporate profit, Double Taxation Avoidance Treaty for the income from the countries with which India has double tax avoidance treaty, Excise Duty on the manufacture of new and unique entities in India, Custom Duty on imports , Service Tax on taxable services, Securities Transaction Tax on transaction of equity shares etc. The state govt. levies Value Added Tax, Sales Tax on inter-state trading of goods, Stamp Duty on transfer of property, State Excise Duty on manufacture of alcohol, Taxes on professions and taxes on various agricultural incomes. Various local bodies in India have the authority to levy taxes I their jurisdiction on Properties like buildings, Octroi i.e. tax on entry of goods within their areas, on market and utilities like drainage, water supply etc.
Income Tax Act 1961 says that every person, who is an assesse and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. Having had a look over this definition many of you might have started wondering as to what exactly do terms like: income, assesse ,assessment year, total income etc. I shall continue with these technicalities and ambiguities in my next article where in I shall elaborate these definitions and introduce the complete structure of Indian Taxation System with a layman’s approach such thatreaders may have complete idea about all existent taxes in the territory of India.However the purpose of this post was to deal with the history of how exactly did this concept come into existence and also to highlight its importance in the society. Kalidasa,one of the greatest scholar in the history of literary India in one of his books, Raghuwansham says on behalf of King Dilip that ,“It was only for the good of his subjects that he collected taxes from them just as the Sun draws moisture from the Earth to give it back a thousand fold”.Before we proceed further let us first understand the basic that if we pay taxes we do it to safeguard our own interests and not because we do some obligations on the govt.
Note:The author is an amateur writer and a neophyte in economics and all contents put here have been taken from various sites many of which are already added in his blogroll. Queries, if any,can be sent to him at mihirjha27@gmail.com and comments are always welcome.
Thanx and Regards
Mihir Jha
