Paying taxes Honestly?

Most people I know pay taxes and also file tax returns. However to say that they file taxes honestly is a little difficult to say.

As a social psychologist if you do analyze why people do not pay taxes, the following seem to be the reasons:

a. Does not seem reasonable: Why should I pay taxes which take away so much of my income when I am not sure that there is some direct benefit to me? In an environment when people are breaking out of joint families, it is difficult to ask a person in Gujarat to pay for some development that may / may not happen in Bihar.

b. Many people are cheating: There is not enough evidence that others are paying honestly, so why should I pay. May be right or wrong, but this seems to be a psychological reason.

c. Leaders are cheating: No clue whether this is true or false in India, but in the US of A, every person who was appointed to the White House paid back taxes. In fact Charles Rangel, head of the President’s main tax-writing committee, admitted to many mistakes and errors  that forced him to resign. How can the common man be expected to fill out the form (after deciphering which form, which edition, etc.) taxes correctly when the Secretary of the Treasury and Chairman of the Direct Taxes Committee cannot?

d. It is too complicated: Filing tax returns means going to a CA and paying huge fees. There is a whole industry out there which has to be fed to ‘explain’ an Act which is supposed to impact everybody above the poverty line. This is ridiculous that Finance Minister after Finance Minister promises to simplify taxation provisions, but ends up complicating it much more. Sad, but true.

e. Consequences of getting caught: Are there any consequences of getting caught? In most cases where businessmen get caught, the cost of coming out of the tax net is less than the cost of paying all the taxes :). Most of it goes to the guy who can catch and almost nothing to the government. But since nobody is complaining, I guess it works.

f. No advantages of paying tax: If I buy a railway pass I get to travel by train, if I buy a toll pass I get to use the toll bridge, what advantages do I get for paying Income taxes? Well nil. In an economy where all actions are done with some expectations, paying taxes is too complicated!

g. When I walk into a MBA class on ‘ethics’ and ask them which bills do we pay on time. All of them say ‘Phone bill’ and ‘Electricity bill’ . On asking ‘Why’ they say “if we do not pay, it will get cut off”. Clearly we pay if we need FURTHER USAGE of the same resource. So if a person is leaving town and going away for good, he/she does not mind leaving the grocer, doctor, milkman, paperman,….high and dry? Well not all of us will do this, but the taxman is not really an ‘ethical’ priority.

more to go..but later perhaps.

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8 Responses to “Paying taxes Honestly?”

  1. M S PANJWANI on May 9th, 2010 at 1:38 pm

    Dear subra,
    Income tax department has appointed tax return preparer’s, where a person can file income tax returns at nominal cost, no need of paying huge fees to CA.

  2. Absolutely agree with all points!!

    Where common man just awake few days before the deadline of filing tax, how many preparer’s will I-T deptt can appoint to help people? why dont just simplify the form so we dont cry for any need?

  3. Srinivas Muthadi on May 10th, 2010 at 9:38 am

    So long as the Govt. has ‘the other’ ways of getting revenue, it is not bothered about the taxes payed by people. I cannot imagine any society (read country) developing, whose major revenue comes from liquor, tobacco and entertainment.

  4. only 3% of indians pay income taxes. instead of no taxation without represtation,we need the reverse slogan ‘no representation without taxation’. elections and vote banks are always about divvying up the tax income. no wonder most of those who are vocal about getting more entitlements and handouts are those who pay no taxes. if Paul is the beneficiary of looting Peter,you can rest assured that Paul will always support you in looting Peter even further.
    income tax should be abolished.plain and simple.i did a back of the envelope calculation based on finmin data and found that if we remove the personal income tax component from the 2008 budget,you’ll just have to go back to the 2003 expenditure outlay.surely,only the looting of the treasury has increased in the last 5 years in the name of nrega or other robbing-hoodisms. no real ground breaking project can have been justified.
    people hate paying taxes. paying taxes doesnt make you a good citizen.demanding 100% accountability of the taxes may make you a decent citizen.
    i pay taxes only because the govt will throw me behind bars if i dont. i pay it just like a little street vendor pays hafta to the burly policeman.not out of love.only out of compulsion.
    in 1861 there were riots when income tax was raised from 1 to we are happy if the tax slabs are anywhere below 20%.our forefathers would be aghast.

  5. If any one is doing business they will surely know this. What ever the tax I pay I had to pay some bribe to IT dept officials with it. If I earn some 10 lacs and show only 5 lacs (to IT dept) and pay some 50,000 as bribe and my competitor who earns same 10 lacs and show only 2 lacs to IT officials but pay 1 lac as bribe(2+1 = 3lacs outgo)., then He will get more respect then me in govt offices . His issues will be listened by officers more carefully. No body cares what you pay to GOVT but they only cares what you pay for GOVT officiala.

    What will be the fate of a person who earns 10 lacs and show entire 10 lacs in IT returns and didn’t (want to) pay any bribe!!!! (if any is there)

    This is INDIA, here things will be like this only 🙂

  6. Dr Mohammed Ali Khan on May 10th, 2010 at 10:14 pm

    Well said..

  7. Probably the real ‘sufferers’, when business class evades taxes, are the salaried class – who pay most of their ‘due’ taxes. Govt. changes/amends rules to increase tax income: which is eventually burdened on the salaried class. Who cares! Salaried class never complains!

  8. Good one Sir though reading it 5 years after it was originally written

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