Karnataka Budget 2016: CM taxes middle class, just as much as we can bear
Taxing is not as easy as picking apples on a farm. Well aware of this, Chief Minister S. Siddaramaiah has decided to introduce taxes that will not be too hard on the middle class. He has tried to come up with a win-win formula of mobilising resources without angering the common man too much.
Some of the products, which will become dearer in the state as a result of the new taxes are DTH, cable services, petrol and diesel. The Chief Minister has taken a wise decision in selecting these products as taxing them will not exactly increase the burden of the middle class. The cable business, for example, is mostly unorganised and the DTH service is provided by various multi-national companies. So the increased tax on them may not pinch the middle class greatly, except for a small number of DTH customers.
Taxing petrol and diesel may not significantly up the burden on people either as their prices have been falling over the last two or three years. Despite the Rs 3 hike proposed by the Budget, the price of petrol and diesel will still remain moderate, while allowing the state to mop up more revenue. Customers may not think too much of this either as petrol and diesel prices are always fluctuating.
This does not mean that there are no other products available for taxation or resource mobilisation. But they are either already heavily taxed or very sensitive to touch. For example tobacco products are already reeling under a high tax and it would be hard to tax them further. Other sectors like film and entertainment could be taxed more, but this could be risky as people are sensitive to such increases.
The sudden cut in the interest rate fixed by the Union government on various social security schemes like the National Savings Scheme and Sukanya scheme for girl children is also a clever move by Union finance minister, Arun Jaitley. It is true the decision could anger those investing in these schemes as India is basically a savings based economy. But the minister has taken this decision following the recent public anger against his Budgetary proposal of taxing 60 per cent of the interest accumulated on EPF contributions and its immediate withdrawal in response to it.
By cutting the interest on various savings scheme, Mr. Jaitely appears to be hoping that people will slowly move to stock market-based investments as it has been bearish over the last three months and needs urgent fund infusion. But as no one can be sure if people will opt for the stock market because of the interest cut, the move is a gamble with its share of pros and cons.
