21.14 ndian onom
drive inequalities in health, education and across kind of taxation could play a big role in
the life chances. this direction.
The World Economic Forum’s Global Risks As in the latest Oxfam report (early 2017),
Report 2016 (third time in series) has found ‘severe India performs relatively poorly on tax
income disparity’ to be one of the top global front. India’s total tax collections are at
risks in the coming decade. A growing body of 16.7 per cent of GDP while its potential
evidence has also demonstrated that economic is about 53 per cent. Its tax structure is
inequality is associated with a range of health and not very progressive since direct taxes
social problems, such as mental illness and violent account for only a third of total taxes. By
crimes. This is true across both rich and poor comparison, South Africa raises 27.4 per
countries. Basically, inequality does not hurt only cent of GDP as taxes, 50 per cent of which
the poor ones but everyone. are direct taxes. Though the Government
of India has projected the share of direct
seArching for the remeDies taxes to improve to around 60 per cent
But the question is whether inequality is inevitable? of the total tax collections in the fiscal
The answer is ‘no’. It is the result of policy 2017-18.
choices. Governments can reverse the situation of (ii) Social spending: Governments’ spending
increase in inequality by taking some important on public services can do miracles in
steps, such as rejecting market fundamentalism, reducing inequality. In India, such
opposing the special interests of powerful elites, spending of the Governments is termed as
and changing the rules and systems that have led the social sector spending which includes
to this situation. Governments need to implement the fund allocations on education,
reforms that redistribute money and power, and nutrition, food, sanitation, general
level the playing field. There are two main areas health care and social protection. Oxfam
where changes to policy could boost economic has provided evidences from more than
equality, namely taxation and social spending. 150 countries (rich and poor) spanning
(i) Progressive taxation: Progressive taxation over three decades to show that overall
method has been proved to be quite investment in public services and social
effective in this regard. In this method protection can tackle inequality. The
of taxation corporations and the richest group has for many years campaigned
individuals pay more tax on their incomes for free, universal public services across
to the state. The increased incomes from countries.
tax on income enables the governments As per the latest report of Oxfam, India
to redistribute resources to the poorer performs poorly on its social sector spending
people across the society. Similarly, a (centre and states put together). India spends
better indirect tax regime can enhance about 3 per cent on education and 1.1 per cent
governments’ income in a big way—as is (though this data has improved to 1.4 per cent by
being projected out of the proposed GST 2016–17) on healthcare of its GDP, respectively.
of India. The role of taxation in reducing In comparison, South Africa spends more than
inequality has been documented in twice as much on education (6.1 per cent) and
OECD and developing countries in a more than three times as much on health (3.7 per
very logical way by now. Thus, a required cent). Though South Africa is more unequal than