In this article we will discuss about the arguments for and against additional taxation.
Arguments for Additional Agricultural Taxation:
(1) Raising the Marketable Surplus:
In the words of Prof. Kaldor. The taxation to agriculture has a critical role to play in the acceleration of economic, development since it is only the imposition of compulsory levies in the agricultural sector itself which enlarge the supply of savings for economic development.
It is a great economic fact that during process of growth, agriculture has to supply the rest of economy with larger food surplus and raw materials. Production and marketable surplus have to increase to meet the needs of non-agricultural sector and also to occupy an increasing proportion of the economy’s man power. It is thus clear that an increase in agricultural taxation is recommended and sought to be justified on the ground of raising marketable surplus from agricultural sector.
(2) Mobilisation of increasing Volume of Domestic Resources:
Our 5 year Plans necessitate mobilisation of increasing volumes of domestic resources. Our plans have always suffered on account of paucity of domestic resources.
One of the reasons for the failure of the Govt. of raise adequate domestic resources is that it has not effectively tapped sayings in agriculture. It is argued that while the Govt. has been inventing increasingly larger amounts in agriculture, it has not made a parallel effort to tax away a substantial portion of the increase in the income of the farmer.
(3) To Look for New Taxes:
The dimensions of present taxation have been rising continuously. The urban sector has to surrender a major portion of their earning to Govt. in term of taxes. This process seems to have reached a stage-where it is becoming self-defeating. Therefore, it is a must to look for new taxes in the agricultural sector.
(4) Earning of the Farmers have gone up Tremendously:
As a consequence of large-scale public investments made- in agricultural sector, the earnings of the tillers have gone up tremendously, our subsistence agriculture is getting the shape of commercial farming. In the present circumstances the traditional agricultural taxation has become outmoded and a system of progressive taxation of farm income should be evolved.
(5) Rectification Regressive Character of our Tax System:
It will rectify to some extent the regressive character of our tax system. It will equalize burden of taxation between agriculturists and non-agriculturist on one hand and landlords and cultivators on the other. It will tax non-agricultural income of a landlord at a higher rate.
(6) Contribution by Agriculture:
The direct taxes on agriculture i.e. land revenue and agricultural income tax have remained static since 1950-51 below 2% of income from agriculture. Agriculture has thus not contributed anything for economic development, even though the crude index of economic welfare of the fanning sector has been increasing.
(7) Concentration of Land in a Few Hands:
In India there is a concentration of land in a few hands and this concentration has increased in recent years. About 50% of land holders men own only 6% of land; less then 05% of land owners own more than 11% of land.
The richer sections of the farmers bear low burden because they pay land tax which is proportional tax and they may or may not pay agricultural income tax. Thus richer sections of the fanners should.be made to bear a reasonable tax burden through levying additional agricultural taxation.
Opposition to Additional Taxation:
(1) The new agricultural strategy has had its direct impact so far on only a parts of farm land. At this stage, it is prudent to encourage it through all possible preferential treatment in the form of taxes.
(2) The Cialisation commerce of agriculture in terms of scientific farming of economy holdings has started but it has not gone far enough to transform the basic situation. Consequently, it may not be in national interest’ to tax the revenue of the developing commercial sector of agriculture and thereby discourage the shift from a peasant economy to a market economy.
(3) A good part of the untaxed incomes of the farmers is certainly being invested in the accumulation of farm capital. In other words to the extent that the farmers could finance from their internal resources part of their own requirements of capital the need for the state providing for this purpose out of its resources for development finance is reduced.
(4) The well-to-do sections of the agricultural community are coming under the net of excise taxation, which covers a wide range of manufactures entering into the changing patterns of diversifying consumption. Consequently, the contribution of rural sector to the revenues of the Govt. through indirect taxation is steadily growing. Hence no need for agricultural taxation.
The imposition of additional taxation agriculture has always been a source of conflict between the Centre and the States. The Chief Minister’s Conference on resource mobilisation held in Oct. 1971 recommended the appointment of an expert committee to examine the Centre’s proposal to link income tax with agricultural income tax.
Accordingly, the Central Government appointed the Committee on Taxation of Agricultural Wealth and Income under the chairmanship of Dr. K.N. Raj in Feb. 1972 to examine the question of agricultural wealth and income from all aspects. The Raj Committee submitted its report in Oct. 1972.