Formal and codified taxes are traced back to the Mauryan Empire where Arthashastra defined the categories and amount of taxes to be provided by farmers, artisans, herders and hunter-gatherers. From Mughal to the British era, taxes were imposed to maintain the funding of wars and the expenditure of rulers. But with time, the nature of the state changed to a welfare state and the government started focusing more on utilising taxes for the betterment of people, building infrastructure and providing a better life to its people. This change also brought the responsibility to the state to reduce social evils and eliminate the prevalent ill-wills of society.
This Blog provides definitions and the types of taxes. It also indicates how taxes are levied by the government to bring change the social and market behaviour. It also suggests the ways by which taxes can be harvested to change the social norms and also it can be utilised as a weapon against the evils in society. The Blog also mentions that taxes are already being used by the government for the same but no proper documentation is being taken into account yet.
KEYWORDS: taxes, society, utilization, levied, strict interpretation.
The history of taxes is as old as the history of domestication. Initially, taxes were imposed by the State to ensure that residents those are living in their Kingdom are supposed to support the ruler in the safety and security of the frontiers. However, with time role and needs of the state changed and Taxes became the source of revenue i.e., the income of the state, which the state utilised for the maintenance of the palace, royalty, frontiers and expansion of the boundaries.
Further in the modern era, the state being democratic in nature functions for the welfare of the residents and sovereign is said to be “of the people by the people and for the people.” Which imposes the state a liability to perform such function that makes society a final place to live and Taxes please a major role in it. The imposition of taxes subconsciously allow the government to eliminate some behaviour among the citizen this character can be used on utilised to maintain and reform the morals and ethics of the society.
TAXES AND THEIR NATURE
‘The money that one has to pay to the government so that it can provide public facility is said to be a tax.’ In addition, ‘tax is a fee levied by the government or the regional entity on a transaction product or activity in order to finance government expenditure.’ Further, it is said to be the responsibility of citizens to pay taxes for the welfare of the state. In return to which they don't expect the state anything except for the common welfare of the society and the development of the country. These taxes are broadly categorised into the following heads:
A. Direct Taxes - These are unavoidable and when levied mandatory be paid by the citizens to its government. They are collected in the form of income tax, payroll tax, corporate tax, property tax, tariffs or estate tax.
B. Indirect Taxes - Government also imposes tax on the sales and purchase of the items and products within its territory. Such Taxes are only applicable when the product is under the transaction. Examples- GST, SAS and VAS taxes.
The nature of all kinds of taxes can be defined as below:
Collected in the form of money,
Based on the gains or income of the person,
Are strictly interpreted.
EFFECT OF TAXES ON SOCIETIES
Taxes help the government to allow or restrict the habits of the citizens. While Direct taxes being income tax binds the citizens with the responsibility of the country and its development. Indirect taxes, on the other hand, are utilised to change the consumption pattern among the people, for example - government imposes very less or zero taxes on goods like medicines, APIs, food articles and other necessities. However, cigarettes, liquors and lottery are taxed very highly to discourage their consumption. Even, luxury goods are to be charged more assuming that they are to be purchased for enjoyment purposes only. This indicates that fewer taxes maybe the mode of encouragement. In contrast, higher taxes will lead to discouragement among citizens.
Similarly, Section 135(1) of the Companies Act 2013, imposes corporate social responsibility on the companies, they must contribute to the specific part of their revenue generated in India for the welfare of the socially deprived, environment or the development of the country. Nearly 2% of the company’s net worth is spent on the same.
The above mention statements show that taxes can bring the following alteration in society:
Responsibility towards country and society
Liability of state expenditure
Control habits of consumption
It also mandates corporations shall be liable for social betterment and advancement.
UTILISATION FOR SOCIAL CHANGE
In general, taxes help to bring direct or indirect control over the market which provide the state with the upper hand to concede the consumption of product in the market. Example-
Sanitary pads, generic medicine, food items etc. as low as possible or the 0% tax slab is used.
Further, whenever the government needs a product for the betterment or care of the citizens they charge taxes which is minimal. An example is sanitizers which were in the 18% index during the COVID dragged into the lesser tax category. Taxes also help in serving the purpose of Directive Principles of State policies (DPSPs) which restricts the wealth concentration in the economic system. This concentration is to be reduced by higher slabs of taxes for higher-paid personnel.
Similarly, to increase the participation of women and to improve their position in society government provides tax redemption to women in the purchase of property. Women are acquainted with a 4% stamp duty on the transfer of property while men are levied with 6% just to encourage women to hold more property.
These facts indicate that taxes can be utilised as a tool for maintaining the social and ethical values of society.
The Indian tax regime is already well-developed and well-defined but there are certain ways by which it can be harvested to bring social reform:
The government is utilising the tax system to change and maintain the market. However, no surveys or proper statistical data have been provided yet which ensure that such implementations properly work in society. So, the surveys and maintenance of records are to be done in the market to ensure the effectiveness of this system.
A committee can be constituted to ensure the efficacy of taxes and their effects on society.
Progressive taxation is needed to ensure that the taxes are friendly and aligned with the need and meets of the society in the country.