EPF Tax must go!

They say that art depicts realities of life. It must be true. A simple perusal of popular cinema over the last 50 years would indicate how much our sensibilities have changed. A ‘Mother India’ was expected not only to disown her wayward son, but even kill him, if honour demanded so. Our movies have since evolved and it is not uncommon to see parents defending the indefensible any longer, e.g., the father defending thefts committed by his daughter in ‘Hansi to Fansi’

While there will be valid arguments made that art not merely depicts but also influences life, it will be difficult to dispute the perception that overall, Indians have been more individualistic, more materialistic, more self-confident and more accepting of shortcomings of who they identify as their own.

A parent defending crimes of his/her child does not seem very outlandish when we see individuals vehemently defending their favorite leaders and political parties for those acts which hardly have any justification, leave alone merit. And to this end, no false logic is weak enough, no argument not contrived enough, no verbal contortions not painful enough to argue even when there is no argument. Cases in points could be the infamous ‘zero-loss’ scams of UPA 2, AAP’s support for Khalistanis or the many many U-turns of the Modi Sarkar.

Modi Sarkar’s recent move of taxing EPF on withdrawal drew similar reactions. While most of hardcore Modi supporters did seem benumbed by this blow on the day it was announced, it did not take long for them to rally in support of this ill-conceived and ill-intended move.

Arguments forwarded by Modi-Bhakts or rather Mo-ley (Modi-Jaitely) Bhakts range from the hilarious to the ridiculous. While some stubbornly cling to the statement of Hasmukh Adhia (overruled the same day by the MoS Finance and Jaitely), that only interest on EPF would be taxed (just why), some have invented quite outlandish arguments around how Indians want to pay no taxes, or how the middle class can afford to pay this tax or even how people have no business to get ‘high’ interest on EPF at all.

One tweet on my timeline did catch attention for what I thought was an outrageous comment. One worthy claimed that ‘basically ppl dont want 2 invest in equity mrkts coz thy r getting 8% w/o any sweat..y shud govt pay 8% at al’

The tweeter then found place on SwarajyaMag and he parroted his line on how Indians have been spoilt by ‘high’ interest rates and that the EPF tax would force them to take responsibility for their own retirement!

Had the reader not been an average salary earning, tax paying individual, he would have been excused for believing (basis the article and of course, the pronouncements of our Honorable Ministers of Finance) that till now, it is the Indian Government which has been taking ‘care’ of all its retired citizens.

To say that the way Government has tied itself in knots trying to defend, rationalize and explain its decision to tax EPF was ridiculous, will be an understatement. From announcing that Tax is on entire corpus, then clarifying that it is on interest, then further clarifying that it is on entire corpus, then re-clarifying that it does not apply to people below a certain threshold salary, then claiming that it is meant to prevent ‘conspicuous consumption’, that it will impact a very small segment of society, and in the same breath claiming that it will help the entire population come under pension, no possible excuse / variant was left untouched, that too, all in 1 day!

Following is my critique to the various arguments in favour of taxing EPF

1.     Touching only 60-70 lakhs people –

a.     By Govt’s own figures, only 3.5 Crore people pay direct taxes, a bulk of them in the lowest tax slab. On the other hand, people in the 1 Crore plus bracket are only 42,800/-. It simply means that the very same population which contributes most significantly to Individual Income Tax is getting further squeezed

b.     What is more disputable is the Government’s claim that 3 crores employees earn less than 15,000/- per month and would not be impacted by the taxation. This argument is with serious flaws. Just how is this figure of Rs 15,000/- determined? Would it mean an employee who starts at Rs 15,000/- per month or if he draws Rs 15,000/- at any time in his life? Since increments, if nothing else, on account of inflation, are bound to happen, just how many employees would continue to be ‘unaffected’ by the tax?

Once increments happen, how would tax treatment be done? On the entire corpus? Or on the post increase salary? What of the cases where the person’s salary reduces (working only part time on account of some reason or simply because of a worse paying job). There may be times when a person is not working. Would zero contribution of that period be used to average out the calculations?

In the year of withdrawal, (at current levels) the proceeds would almost always be in the highest tax slab. Just how will it not be taxed?

2.     People who are impacted do not ‘deserve’ EPF and can pay the tax – If we would not be wrong in assuming that the Government encourages people to move up in their life, it would not be disputed that other than having basic food grains and just about enough to cover one’s self, an average human being wants to have education, a house, a better quality of life for his/her progeny. All this costs money. The more the Government takes, the less an individual would have to spend. If capacity to pay is the question, of course, anything more than what is absolutely critical to survival (or not even that) ‘can’ be paid to the Government. An even more basic question is just how is ‘capacity’ defined? As per our Governments, people earning even Rs 32/47 a day are above poverty line. No wonder it believes that people earning, say Rs 1000 per day are rich and can afford to pay tax on, or even the entire amount which keeps them ‘above’ the Govt defined poverty levels.

3.    Indians do not like to pay taxes – Mr Jayant Sinha, just which citizenry ‘likes’ to pay taxes? Even in your promised land, the US, lowering/rationalization of taxes is a carrot US politicians promise to the electorate (not unlike the promises your party had made before winning power), so just what makes Indian reluctance to pay tax so peculiar? Still, most of the salaried classes pay taxes regularly and you people, rather than making the untaxed sections come under tax bracket, take the easiest way out of hounding, squeezing and crushing a hapless, scattered minority, people who are neither a vote bank, nor capable of coming on streets and holding violent protests!

·          Indirect taxes are borne and paid for by every Indian, even the poorest of the poor.

·         As per Census 2011, 62.5% of our population is in productive age group of 15-59. In absence of a clear data point, let us assume that people in age-groups 15-22, 23-30, 31-37, 38-44, 45-52 and 52-59, all are equally distributed in their total share of 62.5%. That would mean each group having (62.5/7 = 8.9%) share in the total population. Given the low rate of people becoming full time earning members before 21-22, the productive (potential tax paying age-group) falls down to 53.6%. In 2012, the GoI claimed that 21.9% of its population is below the official poverty line. That means this proportion of people can be removed from the potential tax-payer bracket, i.e., (53.6 x 21.9% = 11.7%) That leaves us with potential tax payer bracket of 41.9%. Of our female workforce, barely 10% would be in adequate income earning roles, further reducing the potential tax paying workforce to (41.9% - (41.9 x 0.45) = 23%) of the population. Removing 3% for residents of States which don’t have Income Tax (e.g. J&K), and people whose earning capacity is limited on account of any disability, we are left with barely 20% of population as having capacity to pay tax. Of this, we must remember (inspite of the Government) that people just above or even much above the so-called poverty line will hardly have any taxable income). In addition, the Government exclude farmers and have virtually no control over the trader, professionals, and artisans. So, if finally only 2.9% pay taxes, just what is the surprise?

Government’s act of taxing these people more is simply a punishment to those people for being tax payers in the first place.

Now the more ridiculous claims

‘

4.     Developing a pensioned society – Mr Jaitley claimed that the population impacted would be low and in the same breath he claimed that this will make India a pensioned society! Readers are advised to use their own intellect to decipher which of these claims may be true as both simply cannot be true together!

Even assuming that the Govt. wants Indians to invest in pension funds, the thing to do is to make pension funds attractive, not by forcing people against their will, by taking away their nest eggs. Contribution to PF is in any case mandatory. Just how can the Government further force tax on it? For many people, tax on corpus would be double taxation as given the provisions of section 80C, the forced investment in PF does not earn them any deduction.  

The sinister truth behind this move could be Government’s intent to force people to invest in Equity. Last year, the Finance Ministry forced the browbeaten EPF Board to invest partially in the stock market. With the current move of ‘not taxing’ proceeds if they are investment in annuity, the Government is forcing people to invest in a volatile market, where rather than any consistent logic, ‘sentiments’ and power-players rule the roost. Given that the Government has no role in supporting the middle class for food, medicines and shelter if they fall on bad times, the middle classes are naturally averse to betting their money in schemes/instruments which they don’t understand. And even if the stock market were heaven, just what business would the Government have to force people into it?

Annuities are in any case, a sub-optimal investment decision in many ways. Improve them. If they are good, people will automatically invest in them.

5.    Discourage conspicuous consumption – Come on Mr Jaitley. Are we back in the Indira Gandhi regime? Is withdrawing from PF for children, for house, or for any other requirement ‘conspicuous consumption’? And even if it were, just how is it Government’s concern to control it? As tweeted by Anand Rananathan on Twitter, such words sound even more outlandish coming from an extremely successful lawyer with declared assets of over a 100 Crores and a fleet of luxury cars with signature number plates! Even leaving that apart, just when did the philosophy of this control take rebirth?

Before General Elections 2014, the BJP promised tax reforms, even promising to assess if Income Tax could be eliminated. In 2014 budget, the Finance Minister claimed to be in deep sorrow on account of his inability to raise Income Tax Slabs (as was promised) and rationalize exemptions (as per inflation). Quite a turn in 2 years that forget those promises, the intent now is mercenary. What makes the Government’s move to crush middle class tax-payers even more loathsome is its amnesty scheme to legalise 'Black Money', for a penalty of mere 15%. Quite a benefit to those who do not pay taxes as the penalty otherwise for concealment of income could be upto 300% plus interest.

Some of us might remember that when service tax was introduced, it was a mere 5%, and that too on very limited number of services. Today, the rate (with cess) is at 15% and we are at the cusp of a negative list. Though the GST support brigade may not realise it, once the GST passes, the service tax rate is likely to be at least 18%, if not more.

Likewise, silently accepting the taxation of 60% of corpus, or even the interest component, or even after exclusion of those earning below 15,000 per month is not acceptable at all. Nothing prevents Governments from using a small opening to progressively increase and consume whatever is left. The tax rate may be 30% today. It could be anything later.

Just why has Modi Government undertaken this move?

It is well understood that the so-called-outsider is bending over backwards for integration in the Lutyens elite as ‘one of our own’. It is even more understood that BJP Governments would do anything to appease those who despise its very existence. It is taken as a fact of everyday life that the BJP has little use for its supporters after they have voted for it. Still, it is mind-boggling that the BJP can display so much contempt for its supporters, be it Hindutva, Land Bill, Ecology, Black Money, Corruption, Reforms, Taxation, etc? Have we become the new Muslims that come whatever may, we will only vote for the BJP?

Sedition (?) at JNU

The Americanisation of Indian political journalism has meant that for over a decade now, the most burning issue before the Nation at any point of time is melee around ‘who said what’. If one day, the outrage is on ‘How could Sadhvi Niranjan Jyoti use the term 'Haraamzaade', the next day the righteous indignation could be on an issue as mundane as 'How could they not allow us to demand India's destruction?'

While these contrived fracas may have made careers of many TV anchors and increased traffic on Twitter, at one level, these debates are repetitive and tiring. Not only that, contrary to the literal meaning of debate, these controversies only serve to harden pre-conceived notions and sharpen divides, the outcome many a times abetted by brazen duplicity of those who attempt to define and guide the narrative on free speech.

The following note is in response to a widely circulated write-up on Quora by one Harshit Agarwal, a JNU student, who claims to provide ‘a lot of answers’ from an eyewitness’s perspective.

Harshit's post makes a dishonest attempt to sound reasonable and bipartisan. Following are responses to comments Harshit has made in his post.

Whether seminar on Kashmir is wrong?

Seminars and discussions on Kashmir are dime a dozen and no one is really bothered about statements made on the nature of 'Indian oppression' in Kashmir. Hence, it is quote disingenuous to rhetorically question whether discussions on Kashmir should happen. At the same time, one does wonder the last time JNU or any left aligned body expressed solidarity or provided a platform to exiled Hindus, who also coincidentally, happen to be Kashmiris from Kashmir.

Whether objections to court judgements and capital punishment are wrong?

Of course, denouncement of capital punishment is perfectly okay. But people taking a stand against something (strong action against terror convicts) which has significant National sentiments attached to it, should be ready to bear the brickbats. We have feminists coming down like a ton of bricks on people who dare to highlight inherent biases in domestic violence or rape-related laws. Quite unfair but that holds true for all who cross the line of political correctness. That said, quoting Arundhati Roy's opposition to Afzal's hanging does disservice to those who believe that capital punishments are wrong by their very nature, and not just because the hung belonged to a so-called minority segment of society.

Shouting of 'anti-National' slogans

Harshit's paining of ABVP as the 'sole harbinger of Nationalism' betrays his own sympathies and ideologies. Will he care to explain as to why the 'beautiful JNU where all opinions, however radical are listened and respected', declined to let Baba Ramdev talk? Or did the students feel that his being a 'reactionary' automatically disqualified him from being among them?

In Harshit's world, members of sundry leftist bodies are students but that of ABVP mere 'cadres’. Is that respect or is that inclusion?

He claims that the slogans 'Hum jya chaahte? Azaadi!' were raised to ‘create solidarity’ and in response to ‘clichéd’ slogan of 'Kashmir hamara hai'. If it is so ‘clichéd’, just why did it take their goat so much that they had to demand ‘Azaadi’? How does demand for Azaadi create solidarity in between the communists and Kashmiri separatists?  And if the communist disgust at ‘Kashmir humara hai' is justified, what is wrong in many getting outraged at 'Hum jya chaahte? Azaadi!'

In Harshit’s universe, demand for Azaadi is perfectly normal. For did we not ask for it from British or did not USSR break-up? It is amusing that it escapes him that the ‘collective conscience’ of our people gets outraged when Kashmir’s sectarian struggle for secession from India (and merger with Pakistan) gets equated with India’s struggle to throw off the colonial yoke. If, in his words, secession itself is not bad, then just how wrong would it be to ‘plan a conspiracy to overthrow the government and seize Kashmir from India’?

On a more serious note - Why is Afzal Guru important? Because he is a victim of an unjust Indian state? Or because he is a martyr to the cause of Kashmiri freedom? If it is the former, then just how relevant is the slogan ‘Har ghar se Afzal nikalega’? Afzal Guru’s hanging has neither resulted in a social revolution, nor has it resulted in change in any law. For that matter, even in his life, (the presumed innocent) Afzal did nothing which would create an impact in the country. So, even if each communist womb/household does produce an Afzal, just how enriched will the revolution be?

On the other hand, if Afzal is seen a martyr, someone who dared participate in an attack on Indian parliament, he becomes very important, very prominent. And if this is the Afzal who will be born from each communist household, I will have no hesitation in standing with those who would want such Afzal-producing families to be punished in the most severe manner. Afzal as a martyr is not an activist for Kashmir’s azaadi. He is an active agent of India’s destruction.

Moving from the dangerous to the ridiculous, when Harshit quotes, hold on, Wikipedia! Just which scholar picks up lines from Wiki? Quite funny that two lines in the SC judgement are seen to be over-riding the entire judgement and the cumbersome mercy petition process. Any person who claims to be campaigning against capital punishment should at least be aware that this punishment is to be accorded in the rarest of the rare cases, where the crime is such that it shakes the collective conscience of society. Let him rest assured, that line of SC’s judgement does not mean that Afzal was hung simply to sate someone's bloodlust. The least likes of Harshit can do to refer to the full text of SC judgement  on Afzal's death penalty before deciding that he was innocent. Likewise, let he and others like him refer to the Machhi Singh case and recognise that 'collective conscience' is one of the criterion for 'rarest of rare' since 1983! But when has lazy and haughty ignorance stood in way of prejudices?

As regards terrorist, quite funny that the claim is that only people carrying arms can be called terrorists. Worldwide, across all societies, people supporting and abetting a crime are considered parties to that crime and are punished. Savarkar is sought to be condemned for his supposed involvement in Gandhi's assassination based on some conjecture of his being aware of the assassination plot, based on some supposed testimony of his servant, AFTER Savarkar had died. Here, we have spectacle of support for convicts who attacked parliament. Had it not been for the supreme sacrifice of our security men, many of those who are supporting the terrorists would have lost their lives. But that is okay as the killers are all oppressed by the Indian state. But seriously, does Harshit believe that his fellow-travellers agitating against the hanging of Afzal Guru and calling for destruction of the Indian state are merely court bards and do not actually have to bear any responsibility for their words?

Now the slogans which stirred the pot. This is where Harshit skillfully skirts the issue and portrays demands for India's destruction as normal. He makes quite a few claims. First he says that he was witness to some events on Feb 9. Then he claims that he has never 'witnessed or heard of them (DSU) committing a terror activity'. He further states that he had 'never heard any anti-India' slogans in JNU. He claims that the Kashmiris were outsiders for he had 'never seen them'. That he did not hear any 'Pakistan Zindabad' slogan and then tries to pin the blame on ABVP. Then he triumphantly declares that 'it is clear that no JNU student was involved'

He seems to be quite a man. Whatever he says he did not see cannot have happened! And since he is such a man, let us without question accept the ‘lot of answers’ which he has provided from an eyewitness’s perspective!

(The 'ABVP exposed' video highlights 2 men and a woman. The woman is seen arguing with someone (not sloganeering), 1 man only seen and another seemingly uttering ‘zindabad’. What sort of ‘expose’ is this that of the 3 ‘exposed’, only 1 seems to be actually sloganeering. And is he really an ABVP activist? If so, identity him and question him. Of the so many people chanting Pakistan Zindabad, the communists manage to ‘catch’ half-a-person and are triumphantly declaring that the entire fracas were generated by him!)

JNU is the very place where killing of over 75 jawans by Naxals was celebrated (so much so for being pro-India). The very place where Hindu festivals are suppressed (so much so for diversity)

The 'mild' Marxists, communists, Maoists all belong to political ideologies which suppressed individuals, communities and Nations, clamped down on any form of free speech and killed millions and millions of their own countrymen in purges and class struggle. If it seems too far off, these are the very people who decried independence, commenced an armed struggle, supported China during the 1962 war, committed mayhem in Naxalbari and as Maoists, tapping the many fault lines, are still working for disintegration of the Nation. Do we need to take lessons in democracy and freedom from them?

If rejection of the idea that these killers of freedom of all forms can educate the rest of us on what democracy and liberty are gets called as ‘suppressing dissent’, let us be strong enough to bear that cross. Not all talk is dissent. Talks of subversion are not dissent. The idea of dissent is noble. People who feel they are wronged get listened to sympathetically only when they talk about their misfortune, not when they threaten fire and brimstone on their imagined oppressors.

Dissent can be against the rulers. Dissent can be against entrenched interests. Dissent cannot be against the country, cannot be against our very Nation-hood. If we manage to confuse vicious demands for India’s disintegration with free speech, then, to put it mildly, we have a very serious problem in hand.

The fracas on speeches and slogans calling for India’s destruction at JNU have evoked predictable reactions but for the intriguing stand taken by the Congress. It would have been abnormal for the Communist parties and the born-again secular-socialists like JDU to condemn what happened on Feb 9. However, for the Congress, in spite of its cynical manipulation of the Ishrat Jahan controlled killing case, the Batla House encounter, and the bogey of Hindutva terror, it was quite unexpected that it would side with those who were actively supporting a terror convict and demanding India’s disintegration.

Still, the Congress under Sonia Gandhi is a much regressed version of the party under the original Mrs G, or even PV Narasimha Rao. It is quite scary to imagine that the only party with a truly National footprint can stoop to such pettiness but then we deserve the politicians we have.

As far as the JNU culprits are concerned, it would have been better had these student-activists been charged under NSA rather than with sedition. Given the outcome of even Binayak Sen’s case, we may see courts dismissing sedition charges. On the other hand NSA, if nothing else, could have been a good charge, particularly considering the way the Marxists have always applauded its application on Varun Gandhi, Kamlesh Tiwari, Swami Yashveer and many BJP leaders from Western UP for merely expressing their views.