Tax, if you must

It is now time for the B S Yeddyurappa government to take up relief and rehabilitation works in flood-affected areas of the state on a war-footing. It must reach out to every affected family —rather every person — in as many as a dozen affected districts without any discrimination. While many human lives have been lost, the loss of livestock and property have been of an unprecedented magnitude. The rehabilitation work is therefore of a gigantic proportion and according to initial government estimates, it would require around Rs 10,000 crore.

However, lack of money should not be a reason for any delay in undertaking rehabilitation work. It is the government’s responsibility to mobilise the required resources in a timely manner. Fortunately, people have been very generous and have spontaneously come forward to extend a helping hand with offers in cash and kind. Prime Minister Manmohan Singh has announced an ad hoc grant of Rs 1,000 crore, with assurances of more help from the Centre. It is often said in economics that money saved is money earned. This is the time for the state government to implement some genuine austerity measures. Avoidable and wasteful expenditures by the government at all levels should be done away with. The government should also encourage public-minded individuals and corporate entities who wish to undertake rehabilitation work on their own, integrating all such works into the larger effort.

As it proceeds with the huge task, the government, it seems, is uncomfortable with its financial position. On Sunday, the chief minister sounded political leaders at an all-party meeting his intention to levy special tax to raise additional revenue for the purpose. If required, the government should have the freedom to mop up additional revenue by way of rehabilitation-specific taxes. The chief minister, who is also holds finance portfolio, should be in the best position to assess the revenue situation. Hence, if it is his conclusion that the situation warranted additional taxation, his government should be allowed to levy fresh taxes as a last option. Needless to say, any fresh taxation must be specific for the situation and must be discontinued once the required sums are raised. Often there is a tendency on the part of the government of the day to impose taxes for a specific purpose and continue it indefinitely and divert the proceeds from such taxation for other purposes. It is, therefore, very important for the government to be transparent not only with any new tax proposals but also with the utilisation of the proceeds.

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