There’s not a lot that can be said about this budget and I guess that’s not a bad thing. Most people agree on the fact that there’s nothing path breaking in there but neither is there anything disastrous. Having said that, for me the direction of levelling the playing field, or at least giving the small taxpayer a better chance of success is the standout.
Ironically, the Economist in its latest edition cover story talks about global companies being in retreat all over the world and how their business models, due to local challenges, tax laws and political compulsions (both in their home and host countries) are under significant stress. While the world over, small businesses account for a large chunk of local employment, they almost always punch below their weight in profitability, productivity and in general their overall attractiveness as a career/vocation choice for young people starting out their professional lives. So, measures that make it easier to start, hire, run and prosper as a small business has never been more critical.
For starters, reducing small companies’ (turnover under Rs 50 crores) income tax from 30% to 25% is a very welcome move. Add to this, making it easier and cheaper for these businesses and their promoters to participate in the ongoing digital payments revolution can only help in them growing their business. Taking it a step further, their employees will now pay a lower (albeit not by a lot) income tax putting a little more money in their hands to ostensibly save or spend on businesses run by another small or medium sized business (96% of all businesses in India are classified thus). Stretching this thought further, with better and growing digital footprints these businesses and individuals stand an increasingly better chance of getting bank (or at the very least from formal sources) credit helping them grow their enterprises at far lower rates than at present. Overall this ought to put small businesses and small taxpayers much more on the country’s financial map as they should be.
Given that large businesses especially foreign owned are very unlikely to be engines of growth or of employment, nothing could be better news than SMEs and MSME donning the mantle of flag bearers for our nation’s future.
On a slightly different and somewhat contradictory note, it is disappointing to see nothing ever done to high taxpaying individuals. While there’s always the stick applied to find more ways to track down evaders, there’s never any carrot to do your bit other than nationalistic duty – which as we can plainly see by the numbers hasn’t worked. Why don’t we have preferential treatment to high tax payers for e.g. green channel lines at passport and other government services offices? Just like people outdo each other in spending more at their family weddings, maybe the pride associated with being an esteemed member of the high paying tax club will get more high fliers to pay their fair share. It’s worth a shot I think.
