Taxing farm income

NITI Aayog’s three-year action plan talks of taxing farm income. This is not the only hare-brained idea from the country’s top-level think-tank which seems to care more about putting more cash in the government coffers than the welfare of the people. Its latest move does not factor in the cost and difficulties involved in the farm tax collection, litigation over income-expenditure mismatch claims and putting a large, already harried section at the mercy of tax officials, accountants and lawyers. Given the sweeping powers lately vested in tax officials, the dreaded Inspector raj would extend to the agriculture sector also. Realising the political damage the NITI Aayog proposal can do, Finance Minister Arun Jaitley intervened fast on Wednesday to nix the idea in the bud. He went a step further and clarified that “as per the constitutional allocation of powers, the central government has no jurisdiction to impose tax on agricultural income”. That should rest the matter.

Of course the Centre needs to expand the tax base. This can be done by cutting and lowering tax rates apart from monitoring ostentatious expenditure. Then certain policy wrinkles need to be straightened out. The Centre and states provide subsidies — free power, water and urea etc — to farmers regardless of their income, and at the same time NITI Aayog suggests a tax on them. Why not deny subsidies to well-off farmers, which is far easier to do? Instead of unleashing tax officials on the farmer community it is easier to identify and nab those evading taxes by showing taxable income as farm income. It is not that farmers do not pay taxes at present. According to a noted agro-economist, “Controls on exports and stock limits which suppress farm gate prices are actually implicit taxes on India’s peasantry.” 

The more a government expands the more taxes it would entail on people. Politicians increasingly offer freebies for votes and resort to more taxes to keep promises. Modi’s, Badal’s and Captain’s populist politics costs money. Rather than the spirit of promised reforms, government role and state interference in the citizen’s day-to-day life is alarmingly increasing.