Vote, or pay more taxes

The number of rural rich is rising but urban India continues to bear the tax burden

It’s an old grouse: the urban poor are forced to pay higher taxes every year, but the rural rich get away. The reason: only 50 per cent of urban India votes whereas the figure is much higher at 70-80 per cent in rural India.

So each finance minister says, "You suffer, if you don’t/can’t vote, at least, pay tax to ensure that we can be in power." Many have expressed their anguish on the issue, angry at the differential treatment given to rural and urban India, but urban India's anger is not enough to move a government.

All finance ministers want to do is to milk urban India. So whether we buy houses, visit malls, watch a movie or eat in a restaurant, we need to pay higher taxes. It’s not just taxes; even our insurance premiums to Life Insurance Corporation are used to buy government companies at higher-than-market prices.

On the other hand, Budget speeches openly declare that ‘sale of agricultural land is exempt from capital gains’. In fact, for all we know, our taxes are used to give benefits to people who might be even richer than us. If any finance minister were to simply look at the consumer price index, he would realise the pressure on the urban middle class to continue maintaining their lifestyle. Our ability to spend has been curtailed by inflation and taxes. And even senior citizens are now being denied better rates of interest by banks. Our savings are falling sharply, as the government’s own data shows. And as experts have pointed out, falling savings rate means lower investment as well.

It is a vicious cycle. The government needs to spend for its developmental programmes to ensure rural demand and, more importantly, protect its vote bank. But the resources have to be raised from urban India. No wonder, consumption and savings of urban India are dropping fast. With less cash in their hands urban India is borrowing heavily – personal loans, car loans, home loans, loans against property, credit cards – to maintain basic lifestyle. Credit card expenses are up a whopping 22 per cent between September 2011 and September 2012. Many families have more than two or three loans on their books. Just a few years back, the credit bubble burst in the US; urban India may fast be hurtling towards the same fate now.

This situation can be rectified. If someone takes a call to tax all the rural rich who are buying Mercs and BMWs and paying Rs 10 lakh for a special number plate, the tax burden on urban India can be reduced significantly. While one does not know whether any government in the country will be brave enough to bell the cat, the fact remains that a number of rural families have become ultra rich by selling their land. And it is time finance ministers took note of it.