Category: Taxation
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The words of Arthashastra ring through time: In the happiness of his subjects lies the kings happiness; in their welfare, his welfare. In modern times, likewise, an elected Government must think of peoples welfare as its own

The Budget is a powerful instrument of fiscal and economic policy. Its not a mere statement of accounts but it signals the policies to come and affords an opportunity to the Government to determine its socio-economic priorities and set the developmental direction and speed of the economy. The Budget presentation is a great Government festival celebrated, and the most important event, in Parliament. Ancient Indian texts on statecraft stress the importance of kosha or the treasury.

The Mahabharat (Shantiparva), Samhitas, Smritis, rock inscriptions containing the sacred laws, (the Dharamshastras), deal with taxation and the treasury and mention at length the sources of revenue of the state and the manner and scale of revenue collection. According to a verse in Mahabharat (XII 88,7-8), the king should gather the tax from the state in the manner the bee collects honey without hurting the flower. The text also enjoins that taxes should be levied at the proper time, place and form, and realised in a pleasing manner as the calf suckles the udders of the mother.

According to AL Basham, the author of the magisterial work on the history of ancient India, The Mauryans had evolved a fairly regular system of taxation. Smriti literature and Jatakas refer to diverse sources of revenue and numerous exemptions and remissions. For example, land brought under the plough was not taxed fully for five years (an early variant of tax holiday), while the tax might be wholly or partially remitted in times of bad harvest. Women, children students, learned people (read Brahmins) and ascetics were tax-exempted. The Arthashastra, a masterly treatise on statecraft by Kautilya, says that the chancellor shall first estimate for the year the revenue from each place and sphere of activity under the different heads of account and then arrive at a grand total after adding the delayed receipts of previous year received in the current year. The expenditure on the king, standard rations for essential services, exemptions granted by the king and authorised postponement of payments into the treasury, were to be excluded from the estimates of the revenue akin to the charged expenditure under Article 112(3) of the Constitution, which is shown in the Budget but which cannot be voted by Parliament. The Arthashastra classifies taxes both in cash and kind.

The imperial injunction was that officers shall not start work without authorisation, and were not to collude or quarrel so as to prevent swallowing the revenue due to the kingdom. Taxation should be such that it did not act as a negative check on trade and industry. The obvious intension was to promote freedom of trade and intercourse throughout the realm. Here, there is an early indication of the intent which is behind the Good and Services Tax legislation, yet to be enacted by Parliament.

Kautilya cautions that, if the tax structure is repressive or unbearable, the business community may take flight to neighbouring kingdoms. In todays globalised world, marked by the increasing predominance of transnational corporations, this is a real danger as the TMCs engineer swift flight of their capital and resources, obliterating national boundaries. Kautilya also draws the analogy of the unhurtful manner in which the bee collects honey. Taxes were to be fixed so as always to allow profit to the taxpayer, while having regard to cost of production, capital employed, risks incurred,etc. Notably, profit and not the lsquo;capital was to be taxed. Imports harmful to the state and luxurious goods were to be discouraged by imposing taxes. The rates of taxation varied depending upon the king, though the injunction of the Dharamshastras was that one who pleases the subject is called a king (lsquo;Ranjitascha prajah sarvasteva rajeti).

The welfare of the subjects, as it ought to be in a democracy, has remained the core philosophy of successive Governments post-independence. The Budget of 1991 ushered in the era of economic reforms, signalling a tectonic shift in Budget formulation, with a view to spur economic growth and development. The Budget of 2016-17, while following the path of economic liberalisation in a guarded manner, makes a paradigm shift in the allocation of resources with far greater focus on growth with equity with the clear objective to bridge the yawning rural-urban hiatus, improve healthcare, stimulate investment and bring massive infrastructure development to transform India.

The words of Arthashastra ring through time: In the happiness of his subjects lies the kings happiness; in their welfare, his welfare. He shall not consider as good only that which pleases him but treat as beneficial to him whatever pleases his subjects.

(The writer is Additional Secretary, Lok Sabha. Views expressed here are personal)