India is probably the only country in the world which claims itself to be a socialistic society, yet believes in a massive transfer of wealth from the poor to the rich.
You don’t believe me
1) License Raj: Indian policy makers realized that competition is very good for the consumers and bad for the entrepreneurs. In a competitive environment, the businesses would have to provide better services at cheaper costs.. hence wiping out most of their profits. So our solution…. Force the industry to obtain permits, hence reducing supply and eliminating all competition. Even today even the basic services like taxi, auto-rickshaw and bus comes under their preview and it makes Indian commuting miserable.
2) Ban on VoIP phones: ISD calls for almost no charges, are you kidding!!!!! Govt telecom PSU, VSNL (tata), FLAG (reliance) etc have invested heavily on older telecom networks which will become obsolete (inviable) with the ISP phone and VoIP. Hence to safeguard their interests, lets ban the entire technology.
3) Land acquisition by govt for SEZ. (A massive scheme for transfer of wealth (land) from the poor and redistributed to the rich for free. And if that was not enough, they were given various SOPS and tax holidays)
4) Assured returns: In fertilizer sector, power sector etc. the government will guarantee profits no matter how ancient and inefficient the technology is. (as I was arguing that the bulk of fertilizer, Haj and electricity subsidy would go away if only govt procured fertilizers, airline tickets, and power at competitive rates… which meant not overpaying the industrialists.)
5) IRDA (insurance regulatory authority): It has put a cap on the discounts which the insurance firms can offer. (which are supposed to go from 2008 onwards) why…. too much competition would results in fall in insurance premium and benefit to the common man.
6) Retail: It will benefit the farmers, it will benefit the consumers…. who would want that… hence all corporate retail outlets are discouraged if not banned.
7) Education sector: Education is an enabler which is the surest way to escape poverty. But who would want that….. Hence even after 60 years of independence and after collection massive funds through educational cess, more 1/3 of our population cannot read and write… while the government goes and blows a billions of dollars in subsidizing higher education.
8 ) Direct taxes vs indirect taxes.: All the developed countries tax the income, rather than the expenditure.
Reason: It is easier to introduce tax slabs or progressive taxation rates so that the rich pay a higher proportion of their income as taxes. However Indians have realized that the poor spend a higher portion of their income, while the rich save/reinvest bulk of their income. Hence we decided to go for Indirect Taxes (VAT, Sales Tax, Exercise etc)
(There are other reasons for encouraging direct taxes. Primarily because high VAT discourages consumerism, and hence slows down economic growth)
9) If a poor wants to gamble, he buys a lottery ticket. If he loses, his loss. If he wins, govt slaps a 34% IT on him.
However if a rich wants to gamble, he goes to the stock market. If he loses, he gets a tax shield, while if he wins he need to pay only 10% of the earnings as IT. (or 0% tax if he holds to his stocks for more than 12 months)
10) All income made by hard working individuals are subject to income tax. But all the dividend income of rich individuals are completely tax free.
Just pick any industry, activity or sector, you will find that India has redefined socialism. All rules are designed to ensure livelihood of the rich and continuance of poverty of the poor.
Then as Prax pointed out:
11) If common man cannot buy cannot buy more than 40-50 acres of land. But the Rich, under the name of plantations, infrastructure development etc can acquire thousands of acres. Also while the common farmer is committing suicide, the Zamindars are minting money because their farm income is Tax free.
12) All the gifts that we give are taxed, while the corrupt politicians don’t pay a single penny in tax on the thousands of crore they receive as gifts.
PS: If I have omitted any sector, then please let me know
5 replies on “India: Socialist country with a twist.”
Check this good article.
yes ULIPs are not exactly insurance http://enagar.com/2006/10/19/ulip-insurance/
the charges are too high and the sum assured is very little. infact SA is rarely more than 3-4 years of contribution. Hence although you are buying insurance for 20 years there is no insurance benefits after 3 years.
on dividends there is a 15 % ddt over and above corporate tax
and on trading and shares there is the stt
so things r not that tax free
and the fm has now put stt as business exp
u have forgotten to mention that agricultural income is not taxed
and any income can be declared as agricultural income
this is a major source of fudging and black economy
plus gifts received by politicians and political parties in cash are
also tax free
thanks updated the post with the 2 points u raised.
for someone who made a killing as a long term investor in stock market, STT is still a very small expense (as the percentage of the turnover). hence i did not mention it in the post.