It is often heard these days that the Indian government is short of funds, how would it find the money for public welfare measures? The questions of paucity of funds is not raised when it comes to running the top-heavy administration, providing new cars, all amenities of luxury and frequent foreign trips of the ministers, bureaucrats and MPs or for pushing up the military expenditure sky-high. But whenever the question of expenditure on food, fertilizer, education, public health and other measures in the interest of the people is raised, the Indian government pleads inability due to lack of funds. The situation was not like this even 20 years back. The government used to spend some money under these heads at that time, although far short of the requirement. Why this sudden shortage of funds, especially since 1991 when the new economic policies were introduced? It was because the new policies resolved, among others, that firstly, the government would not subsidize anything for the people, everything would have to be procured at market prices — even education and medical and health facilities; secondly, tax relief and exemptions would be provided to the big industries and business enterprises in the interest of “industrial development”.

That lack of government funds is a lame excuse is now quite apparent to people. The successive governments in Delhi have been providing unbriddled tax relief and exemptions to the owner-capitalist class, resulting in dwindling of government funds. But, in the midst of this, the huge expenditures on top-heavy administration, providing luxuries to the ministers/bureaucrats and the military forces have not been curtailed, but stepped up. So, the pressure on the government funds has been increasing, and the government has been drastically reducing expenditure on public welfare measures. Whenever the government and the newspapers have pleaded as an excuse that the government lacks funds we have categorically pointed out the tax relief and exemptions provided to the owner-capitalists, to prove the falsity of the plea. Some have raised the questions: What do the tax exemptions and relief provided by the government amount to ? Is it so much that some significant work in the people’s interest could have been funded by this money?

Although the answer to this cannot be directly found from the government statements, it is not difficult to make an assessment from the government statistics provided. The government always announces any tax relief or exemption as a percentage of the turnover from which the monetary amount of the particular relief and/or exemption cannot be ascertained straightaway. In the annual financial reviews or budget speeches, too, the government does not provide a clear account intelligible to the people. Rather, while announcing a particular exemption in terms of percentage figure, the government takes pains to stress that the exemption would not result in a decrease of the total revenues. There is an element of deceit in this, because even if it is assumed that the total government revenues do not decrease in terms of money, the income of the government decreases in real terms, in the perspective of the ever-increasing government expenditure and erosion of the value of money, unless the government revenues go up in keeping with the increase of production in the country.

It is the capitalist class that is benefited by tax-exemption

From the figures for the total domestic production of the country (GDP) along with the percentage figures of government taxes and duties, a fairly reliable assessment of the amount of exemptions can be obtained. Leaving aside the various complexities and trickeries of GDP calculation, it can be stated simply and roughly that the GDP represents the monetary value of the total production in agriculture, industry and service sectors, etc. in the country including the “income” from the loans received. So, if the GDP increases, the total revenue of the government should increase even if the percentages of tax and duties are not raised. But even if the percentage rates are decreased, the total government revenue may not go down because of the additional revenues collected due to the increased production — but the increase in government revenues that could have been possible, does not come about. Let us view the matter on an arbitrary example. Let us consider the total GDP to be Rs.1000/-. Let us also assume that the government collects Rs.100/- as taxes, that is, the tax rate is 10% of the GDP. Let us further assume that the GDP increases to Rs.2000/- next year. Now, even if the government decreases the tax rate to 5%, the government revenues remain at Rs.100 as before, and the government can claim that the revenues have not decreased. Or else, if the percentage is decreased from 10% to 6%, the government can claim that the revenues have increased to Rs.120/- from Rs.100/- during the last year, despite a reduction in the tax rate. But the truth is that the government revenues could have jumped up to Rs.200/- if the old tax-rate of 10% had been continued, but that did not happen. That is, the tax-payers (mainly, the capitalist class) reap the harvest.

Let us now pass on to actual figures. In 1980-81, ten years before the so-called liberal economic policies were introduced, policies liberal to the capitalists but harsh upon the people, taxes amounted to l4.9% of the GDP. More or less the same rate continued for the next ten years. During 1990-91 tax was 15% of the GDP. (Source : Indian Economy by Mishra and Puri) Just after this, dolling out enormous tax-exemptions started under the new economic policies. In 1997, the United Front Government in Delhi supported by the CPI(M)-CPI even outdid the earlier Congress ministry in the matter of providing tax exemptions to the capitalists. The budget placed by the Front government finance minister Chidambaram was termed as the “dream budget” in favour of the liberalization policies by the capitalist circles and the newspapers controlled by them. Under the so-called liberalization policies, exemptions have been provided mainly in corporate tax, duties on import-export, income-tax in the higher slabs, capital gains tax, tax on dividends, etc. — all benefiting the owners of capital. In the past, an exemption of indirect taxes used to result in some decrease in market prices of commodities. But that does not happen any more; the owners generally keep the prices unchanged and usurp the benefit of tax reduction. This practice has reached to such a stage that a finance minister, while placing the budget, commented that if the owners did not reduce prices corresponding to tax reduction, the tax reduction would be withdrawn. But that did not make any difference because the owners knew well to what extent the finance minister, dependent on them and indebted to them for his position, can go. So, these days, the benefit due to a reduction in even an indirect tax like excise duty, is pocketed by the owners.

Amount of tax exemption

Let us now see how much the exemptions amounted to in the central budget of 2004-05. In the process of continued reduction in taxes, the taxes amounted to only about 9% of GDP. This reduction from the earlier 15% to nearly 9% means that the exemptions amount to about 6% of the GDP. The economic review by the central government for 2004-’05 put the total GDP at Rs.25,16,900 crore. Had the taxes been at the 1990-91 level of 15%, the government could have collected about Rs.3,77,535 crore as taxes. But as the present taxation rate stands around 9%, the government would collect only about Rs.2,26,521 crore. That is, as a result of tax reduction amounting to 6% of the GDP, the government has given up a possible earning of about Rs.1,51,014 crore in 2004-05 alone! When it is remembered that the present Congress-led UPA government cannot stay in power without the backing of the CPI(M) and its associates, it becomes crystal clear that the CPI(M) tacitly supports grant of such huge concessions to the capitalist class.

The trickery of CPI(M)

However, in order to put up a pretence as if it is opposed to the grant of concessions to the capitalist class, the CPI(M), through its trade union wing CITU, has raised the demand that in the background of the huge tax and duty reduction/exemptions granted to the capitalist class since 1991, an additional revenue of Rs.30,000 crore can be generated by increasing the taxes by only 1½% of the GDP and if a further sum of Rs.20,000 crore can be provided by curtailing the military expenditure and other expenditures, a total sum of Rs.50,000 crore would be available which should be allotted for implementing public welfare measures. They are posing as if they are not sycophants of the Congress-led central government, rather they are pressurizing this government to secure Rs.50,000 crore in the people’s interest.

There are 3 points to be noted in this regard: (1) They are not raising the demand for imposition of income-tax on the big agricultural capitalists; (2) they have not demanded effective steps to recover the huge mass of black money that virtually runs a parallel economy in the country; (3) although during the past 13 years, under the new economic policies, the exemptions and concessions granted to the capitalist class amounted to 6% of the GDP, they are speaking about raising the taxes by only 1½% of the GDP. (Ref. Ganashakti, the CPI(M) Bengali daily, 2.2.2005)

Everybody knows that agricultural production constitutes more or less 25% of the GDP, that is, its value is over Rs.6,00,000 crore. 40% of this, that is, agricultural production worth Rs.2,40,000 crore is owned by the rich peasants who number only 10% of the total peasantry and who pay no income-tax at all. It is not difficult to raise Rs.50,000 crore if a little tax is imposed on their income. But not to speak of the Congress or the BJP, even the CPI(M) is averse to it. Why is this so? Is it because the CPI(M) aspires to gain some advantage in elections in the agriculturally rich North Indian belt by currying favour with the agricultural capitalists, in league with the Congress? In reality, the CPI(M), too, supports the new economic policies whose essence is to provide relief, exemption and subsidy-subvention to Indian and foreign capital — not to the people but at their cost. In West Bengal and Tripura, being in government, the CPI(M) has been continually granting exemptions and concessions to Indian and foreign capital in the same way as the BJP and Congress-led governments in Delhi have been doing.

Thus, in short, it is the capitalists-monopolists themselves that reap the harvest from the deeds of all the big ruling political parties every time at the cost of people’s welfare.