Highlights

• Public resources should only be for the benefit of the Public and if allocated or auctioned to any Party, the method should protect the interest of the Public.
• The concept of ‘Enablers’ should be understood and all Enablers should be taxed differently from other Goods and Services.

Quotations for Consideration:

“You don’t get gushers of revenue by raising tax rates. You get it through expansion.” – George P. Shultz

Key Concepts

Objective of Taxation

It should be the aim of any Government to arrive at a pricing and taxation policy for all Goods and Services that takes into account the difference in the nature and purpose of each and, is directed so as to equitably deliver the maximum benefit to the public and, not just to generate the maximum, immediate or short-term, tax revenues to the Government, even if it then claims to use such revenues only for public good. A benefit that can accrue to the public directly is far more equitable and effective than that which is first pooled into the Government’s ‘sticky’ hands and then re-distributed. The Government’s need for tax, like its bureaucracy, will otherwise be ever growing and there exists a strong and undesirable correlation between them.

Services vs Goods:

Consumers tend to spend relatively less on goods and more on services as their incomes rise. Once people have met their basic needs, they tend to want better medical care, transportation and communication, information, recreation, entertainment, financial and legal advice etc. Services including design, flexibility, innovation and smartness are steadily substituting for materials in our manufacturing, exports and trade.

Categorization of Goods and Services:

All types of Good and Services cannot be considered as being similar. They fall under three categories. The first category includes those that are consumed or used as end or final products itself divided into ‘staples or essentials’ and others, while the second category includes those that are intermediate products and services consumed in the production of such end products and finally, in the third category are the enablers, those which act as something like catalysts for, or are the essential inputs for, increasing productivity and generating greater employment and thus leading to greater tax collection.

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