{"id":3109,"date":"2014-12-02T12:05:28","date_gmt":"2014-12-02T06:35:28","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=3109"},"modified":"2014-12-02T12:05:28","modified_gmt":"2014-12-02T06:35:28","slug":"warren-buffetts-favourite-business-book-tells-us-what-is-wrong-with-indias-tax-system","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2014\/12\/02\/warren-buffetts-favourite-business-book-tells-us-what-is-wrong-with-indias-tax-system\/","title":{"rendered":"Warren Buffett’s favourite business book tells us what is wrong with India’s tax system"},"content":{"rendered":"
<\/a><\/p>\n Vivek Kaul <\/span><\/span><\/span><\/p>\n Business books are soporific. They put me to sleep. Statement of Revenue Foregone<\/b><\/p>\n
\nNonetheless, now and then, one does come across an excellent business book as well. These days I am reading John Brooks’ <\/span><\/span><\/span>Business Adventures.<\/i><\/span><\/span><\/span> The book is a collection of 12 long articles that Brooks wrote for the <\/span><\/span><\/span>New Yorker <\/i><\/span><\/span><\/span>magazine.
\nIn July 2014, Bill Gates wrote a blog titled <\/span><\/span><\/span>The Best Business Book I’ve Ever Read.<\/span><\/i><\/span><\/span><\/span><\/span><\/a> As he put it : \u201cNot long after I first met Warren Buffett back in 1991, I asked him to recommend his favorite book about business. He didn\u2019t miss a beat: \u201cIt\u2019s <\/span><\/span><\/span>Business Adventures<\/span><\/span><\/span><\/em>, by John Brooks,\u201d he said. \u201cI\u2019ll send you my copy.\u201d I was intrigued: I had never heard of <\/span><\/span><\/span>Business Adventures<\/span><\/span><\/span><\/em>\u00a0or John Brooks. Today, more than two decades after Warren lent it to me\u2014and more than four decades after it was first published\u2014<\/span><\/span><\/span>Business Adventures<\/i><\/span><\/span><\/span><\/em>\u00a0remains the best business book I\u2019ve ever read.\u201d This blog by Gates sent the book to the top of the best-sellers lists almost everywhere.
\nThe third chapter of the book is called <\/span><\/span><\/span>The Federal Income Tax. <\/i><\/span><\/span><\/span>Brooks makes several points in the chapter about the income tax system in the United States as it had prevailed in the fifties and sixties. Some of the points I feel are as applicable to the general tax environment in India today as they were in the United States back then.
\nAs Brooks writes in the context of the federal income tax in the United States: \u201cA good deal of the attention given to the income tax is based on the proposition that the tax is neither logical nor equitable. Probably, the broadest and most serious charge is that the law has close to its heart something very much like a lie; that is, it provides for taxing incomes at steeply progressive rates, and then goes on to supply an array of escape hatches so convenient that hardly anyone, no matter how rich, need pay the top rates or anything like them.\u201d
\nLong story short: The rich were \u201csupposed\u201d to be taxed at a high rate, but at the same time enough loopholes were built into the income tax laws ensuring that they did not pay the highest tax rates in reality.
\nA similar sort of scenario prevails in India when it comes to the Income Tax Act in particular and taxes in general. Along with the budget every year, the government of India <\/span><\/span><\/span>puts out a statement of revenue foregone under the central tax system. <\/span><\/span><\/span><\/span><\/span><\/a>
\nWhat is the purpose of this system? \u201cThe estimates and projections are intended to indicate the potential revenue gain that would be realised by removing exemptions, deductions, weighted deductions and similar measures,\u201d the latest statement of revenue foregone points out.
\nThe deductions, exemptions and other measures lead to a loss of revenue for the government. As can be seen from the accompanying table the revenue foregone for the government during the year 2013-2014 has been estimated to be at Rs 5,72,923.3 crore.
\n<\/span><\/span><\/span><\/p>\n