In one of the newspapers Sandeep Shanbag was lamenting about very few Indians paying tax. This is perhaps true from the records. However whenever I eat on the footpath (rarely, but it happens) I speak to the vendors about their income, their savings, and even their investments. One thing that comes out is that the amount of bribes that they pay – a clear function of the geography- towards the police, the municipal authorities, etc. is stunningly around 5-6% of their turnover, which translates to about 30% of INCOME tax.

Sadly this goes to the pocket of the guys collecting it and not to the authorities. I have no comments to offer, but looks like goondas, corrupt officials, and the government all seem to agree that the tax rates should be 30% of Income. Frankly most people I meet end up paying this amount – willingly or unwillingly. Even a businessman who cheats on Income tax has to pay service tax on his mobile bills, securities transaction tax on his equity dealings (thanks to Pranab da now he will start cheating on his cap gains, LOL).

This brings us to the question why people do not like to pay tax. I think people want to be sure that the money gets used well. Does it happen, well no. Recently an engineer of Kalyan Dombivili Municipal Corporation (KDMC) Mr. Sunil Joshi was arrested. He has a salary of Rs. 49,000 per month. Not bad. He was arrested taking a bribe and there was a raid on his house. They found a 5000 sq ft. house (worth Rs. 2 crores, 3 cars worth Rs. 40 lakhs, Jacuzzi, 7 plasma television sets, gold jewellery….the people making the inventory got tired :).

He must have of course tried bribing them…but nothing has happened. This reminds me I know of a customs ware-house in-charge (he makes and holds inventory of confiscated goods) who has 2-3 houses in one Mumbai suburb :).

Surely these people were paying income tax on their salary – it it not paying taxes on the bribes that people are angry about 🙂