Question

‘Taxes are a fact of life, and businesses, like individuals, must pay taxes on Income’ – Elucidate.

Answer 1

‘Taxes are a fact of life, and businesses, like individuals, must pay taxes on Income’

Some people and businesses raise the question 'Why should I pay tax? They argue: I have to pay for my food, for my house, for my travel, for my medical treatment, for owning a vehicle not only cost of the vehicle but also vehicle tax. Even on many roads, one has to pay a road tax.

  In every country, we have governments at the local, state and national levels. These governments have various parts to them, including legislators executives, judiciary, and many others. Tax is essential to help the government give us protection, build better roads and bridges, institutions and provide social infrastructures. The money these government workers receive to do their jobs comes from taxes. We need to appreciate that the Government has to discharge a number of responsibilities, which include Health care through government hospitals, education, etc. The Government also provides essential amenities at a concessional rate or gives subsidy. Of course, the major expenditure of Government has to be incurred on National Defence, Infrastructure Developments, etc. Taxes are used by the government for carrying out various welfare schemes including employment programs. There are lakhs of employees in various departments and the administrative cost has to be borne by the Government. Though the judicial process involves delay, yet the Salaries, perks of Judges, and judicial staff has also to be paid by the Government. In addition to paying the salaries of government workers, your tax dollars also help to support common resources, such as police and firefighters. Taxes are collected on goods or services where the social cost is not reflected in the private cost. For example, tobacco and alcohol are heavily taxed due to the health problems it causes and because the cost associated with health care is usually borne by the government. No government can sustain itself without tax, thus on considering these various duties of the Government, we need to appreciate that we must pay tax as per law. We have to act like a responsible citizen.

Taxes take many forms, too. When you work at a job to make money, you pay income taxes. Depending on how much money you make, a certain percentage of the money you make is withheld as tax and deposited to the government. When you buy things at a store, you also usually pay sales tax, which is a percentage of the cost of the item charged by the store. If you own property, you also pay property taxes on the value of your property. Paying your taxes is considered a civic duty, although doing so is also a requirement of the law. If you do not pay your taxes, the government agency that oversees taxes will require you to pay your taxes or else face penalties, such as fines or going to jail.

A taxpayer, in general, feels that taxes are a burden and it is human tendency to avoid payment of tax or at least minimizing the tax liability. In earlier years the tax rates were also exorbitant. Prior to Eighties, the rate of Income-tax was as much as 97.75 percent inclusive of surcharge. But now the scenario is fast changing. Though the tax rates have been lowered, still our country lacks the desired tax culture like developed nations. It has been said by Justice Holmes of the US Supreme Court that "Taxes are the price for civilization". It is time tax is no longer considered as a burden but a price for civilization.

Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools. Potential for tax collection is much higher than what we achieve at present but that is possible if we take adequate and sustained efforts for developing tax culture and also take sincere steps for minimizing harassment of tax-payers as well as develop a sense of accountability to ensure hassle-free service, just and fair dealing with the taxpayers.

The reasons for the apathy of the government and the taxpayers towards the tax payment and development of tax culture are:-

1) Most people feel that tax is a burden and should be avoided.

2) Taxpayers feel that they are being treated harshly and the punitive provisions in the tax laws are applied ruthlessly against them. Hence, it is better to be away from the tax department and the number of non-filers of tax returns is increasing.

3) A proper tax culture can develop only when taxpayers and tax collectors discharge their obligations equally well.

4) Many taxpayers become defiant, demotivated and disillusioned because of wrong notions held by tax collectors about their powers, the desire to pass on their part of work to taxpayers, indifference towards them and an attitude that assessees are out to manipulate figures and evade taxes. Such notions strike at the roots of healthy tax culture.

The present realities of taxpayers' behavior are increasing the tendency for payment of lawful tax. Particularly the young businessmen's trend is to pay proper tax, which is a welcome sign. Analytical study of grievance about work culture and a sense of fair play on part of the IT authorities will further help. If, however, too much tax money was withheld from your paychecks, you will receive a refund from the government. If one learns the basic rules, he feels comfortable in making compliance, and fear about the income tax department may remain no longer. In fact many times it is a fear of unknown. It is necessary to frequently organize meaningful and well-designed taxpayers' education and assistance programs coupled with making available to the taxpayer's departmental publication.

What is really needed on the part of the tax professionals also is to advise their clients on the present tax scenario which is much liberal than earlier decades. They may play a vital role in educating the taxpayers as to why they should pay the right amount of tax. Those having taxable income should certainly declare the income, pay income tax and furnish the Income-tax return within the prescribed time. The default or delay in fulfilling one's obligation may result in the levy of interest and penalty. Even in some cases of tax evasion and other serious lapses, the authorities may launch prosecution against erring people. The department may carry out surveys. It has also an Investigation wing, which is empowered to carry out search and seizure operations. Therefore one needs to be very careful.

Let us take a pledge to help in developing tax culture and help to create a positive public opinion. We need to shun the apathy of some taxpayers who are averse to payment of the taxes. Taxes help the government generate a steady source of income which is eventually used for the development of the nation. The collection of taxes itself serves as a means of redistribution, as does social spending on programs designed to overcome poverty and inequality, proceeds from taxes go a long way to improve the standard of living in a society. Tax services should be reformed to make it more flexible to directly reduce defaulters. It is also important to know that paying our taxes makes us better citizens, helping build a stronger nation for its citizens and the future generation that will follow.