Finance Minister Nirmala Sitharaman’s recent tabling of the Income Tax Bill, 2025, marks a significant shift in India’s tax landscape. The government claims the bill simplifies compliance, reduces ambiguity, and modernizes the tax system. However, while the effort to de-clutter tax laws is commendable, the bill fails to address key concerns that directly impact consumers, particularly regarding tax predictability, dispute resolution, and incentives for economic growth.

The government promoted the new bill as a victory for simplification, fewer words, forty per cent reduced redundancy of provisions and a streamlined structure overall. The replacement of “assessment year” with “tax year” aligns the Indian system with global norms, promising much-needed clarity for taxpayers and businesses. But below this new coat of paint lies the same rust. The bill does not truly significantly overhaul the tax structure. Plenty of provisions from the 1961 act remain intact under new labels, forcing taxpayers to navigate through a maze of cross-references. Words don’t cut complexity, especially if the system remains convoluted.

Tax Litigation remains the biggest headache for Indian taxpayers, with unresolved disputes piling up to 13.4 trillion rupees as of March 2024. Yet, the new bill makes no major attempts to introduce a fast-track dispute resolution model to address the pressing issue. For instance the UK’s Alternative Dispute Resolution (ADR) System provides taxpayers and authorities room to negotiate, removing expensive legal proceedings and clearing backlogs. A similar model can be implemented in India to reduce judicial backlog and boost the confidence of taxpayers.

Foreign investors remain wary of India’s tax system due to its unpredictability. The bill does little to change that; it fails to introduce effective mechanisms to address complicated cases, such as the Rs 1.4 billion tax demand against Volkswagen, which exemplifies the perils of prolonged tax disputes. If India wants to stay relevant and maintain its competitive edge, it must offer a framework that is not just simplified on paper but also predictable, stable, and fair enough to attract investors. For a nation aspiring to be a global tech hub, the new Income Tax Bill fails to support start-ups and innovation driven sectors.

The USA, for example, promotes investment through R&D tax credits, encouraging growth in emerging industries. Singapore goes a step further with generous tax exemptions to start-ups allowing them to reinvest in job creation and expansion. Yet, India’s new bill keeps a rigid framework, providing no meaningful incentives or financial push for budding start-ups. If innovation is the goal, the tax system needs to fuel it, not stifle it. The bill also misses a crucial opportunity to promote green energy. Tax incentives could have encouraged investment in renewables, making India a leader in clean technology. Instead, it remains silent on how taxation can drive sustainable consumer choices, another lost chance to align policy with progress.

The Income Tax Bill 2025 is definitely a step towards tax simplification, but it should not come at the cost of overlooking key economic drivers, innovation incentives, investor confidence, and dispute resolution. The system remains a roadblock rather than a catalyst for growth. If the government wants to empower businesses and consumers, it must ensure tax laws are enablers of economic growth rather than an administrative burden. India has the opportunity to create a transparent, efficient, and globally competitive tax system. However, in its current form, the new tax bill risks being more of a cosmetic update rather than the structural reform India truly needs. If policymakers aim to make India an attractive destination for investment and economic prosperity, they must go beyond word count reductions and focus on real, substantive change.

Originally published here

Two complaints are most common among Canadians during tax time: taxes are too high, and filing taxes is too complicated. With every new kind of tax and deduction hitting Canadians every tax season, it’s no wonder something like autofiling might seem like an attractive prospect. The refrain is often that the government already knows what you owe, so why would they make you do the work to figure it out and, if you’re wrong, get you in trouble?

Enter autofiling, a program that at first glance seems to solve this problem. The Canadian Revenue Service (CRA) is now enabling low-income Canadians, often the people with the most straigh-forward claims as well as those who tend not to file on time or sometimes at all. However, as one American president once put it, some of the most terrifying words in the English language are I’m from the government and I’m here to help.

It should not come as a surprise that the government getting in the business of controlling your tax returns is not going to end well. This new system entails the CRA automatically filing your taxes based on all the relevant information they have on hand, plus what they receive from third parties. Or, at least, what they think they have received from third parties. One Quebec man received an “unreported income letter” from the CRA after using the CRA’s autofill feature to fill out his TurboTax return. The CRA claimed that he had not filed investment income on his tax return as a result of a third party tax slip not appearing on his CRA account. It was never submitted because the CRA simply did not receive it in time.  As a result, the CRA, which had themselves made the mistake in the autofill, issued the man a Notice of Reassessment and a fine of $70,000 in arrears interest

The CRA encourages taxpayers to use their autofill system to fill out their tax returns, and then fines them because the CRA did not have a certain document. If the CRA wants to enact an autofile system for Canadians, how can taxpayers trust that the CRA isn’t going to make a mistake and then make the taxpayer pay for it? If there is a fight over a return, who would arbitrate this disagreement between the taxpayer and the CRA? Well, the CRA of course. This massive conflict of interest is akin to your boss adjudicating himself over whether he’s paid you your wages or not. You likely aren’t going to win that fight. The British experiment with autofiling has shown that the tax agency is not a reliable tax filer, since in 2010 six million taxpayers who used autofile received incorrect returns, and three-quarter of those returns overbilled taxpayers.

In addition to the harrowing possibility that the CRA could simply fine you for their own mistakes, autofiling will have to contend with the fact that the CRA is going to need a lot of information about the filer in order to make the system work. However, the CRA’s abysmal track record of being able to protect taxpayers’ privacy should scare Canadians away from this system. How can Canadians trust the government to protect that information when the CRA has proven time and again they cannot protect themselves from getting hacked. In 2014, the CRA allowed hackers access to 900 social security numbers. In 2020, hackers were able to use usernames and passwords they had previously stolen from the CRA to access peoples’ accounts, a breach which affected approximately 48,500 users. More recently, in 2021 the CRA admitted that they had to lock approximately 800,000 online accounts because third parties might have been able to obtain usernames and passwords. This centralization of data into one bureaucratic behemoth that cannot seem to be able to stop itself from getting hacked does not just flirt with danger, it invites cyber attacks, identity theft, and the potential misuse of personal information. 

There is often an elitist notion that low-income individuals can’t do things for themselves, and simply need help from those who obviously know better. This smug and paternalistic argument continues to prevail in systems like tax autofiling. If low-income people seem to not be able to do their taxes, that might be because most people in Canada of all socio-economic backgrounds find filing their taxes challenging. Rather than build this leviathan-looking program that will put legality and privacy at risk for Canadians, the CRA should focus on making tax filing less complicated by simplifying the tax code. There are many redundant tax credits that could be grouped together, small tax credits that are filed for with very little money in return, and different tax rates for small businesses that could simply be unified rather than having them file for multiple deductions and credits. For low-income Canadians more specifically, the CRA could simplify things by increasing the tax-free basic personal tax threshold from $15,705 in income to a higher amount. The CRA could even reduce the fines they impose on low-income people who file late, or expand the Community Volunteer Income Tax Program that has people from their community help them file their taxes if they need it. 

Tax autofiling has clearly failed in places like the United Kingdom, and promotes a system where the CRA is the judge, jury, and executioner of filings that they often get wrong, in a database that is often hacked. This should not give low-income Canadians a sense of relief, rather they should be worried that they are being targeted in a misguided attempt to make life easier for them. What all taxpayers in Canada need is a more simplified tax code that makes the process more streamlined and straight-forward rather than relying on the government to do the work for them. Whenever the government steps up to help, Canadians of all income brackets should seriously worry. 

Originally published here

The GST Council (Goods and Service Tax) recently announced a bewildering array of extra tax rates for popcorn, sparking an understandable backlash among economists, businesses, and consumers alike. Salted and spiced popcorn is taxed at 5 per cent if loose, 12 per cent if prepackaged and labelled, and 18 per cent if caramelized. While intended for clarity, this new classification has done more harm than good, causing confusion, adding up needless compliance costs, and leaving consumers bearing the brunt of the damage in the form of higher prices and fewer choices. 

The GST system was introduced with the promise of a “Good and Simple Tax.” Yet decisions like this demonstrate how far it has deviated from that vision. Former Chief Economic Adviser K.V. Subramanian aptly summarized the situation: “Complexity is a bureaucrat’s delight and citizens’ nightmare.” The popcorn tax serves as a perfect example of this. A simple grocery store or movie theatre purchase now comes with a dilemma. Is the popcorn pre-packaged? Is it salted or caramel? Each of these questions determines the tax rate and, ultimately, what consumers pay at the counter. These convoluted policies hit the middle and lowerincome groups the hardest, where a small price hike on household essentials can significantly impact budgets.

As one social media user pointed out, this could pave the way for taxing entire restaurant menus differently based on ingredients. Such granular taxation complicates compliance and restricts consumer freedom by penalizing certain choices over others. Moreover, this fragmented approach disproportionately affects small businesses. Smaller popcorn manufacturers and vendors, already operating on thin margins, now face additional compliance burdens. For many, this could mean passing costs onto consumers or shutting down altogether, further reducing options in the market. The popcorn tax exposes a deeprooted issue within India’s GST structure: the strong obsession with micromanagement and over-classification. Taxation should be neutral, refraining distortions that favour one service or product over another. Instead, policies like these fail to regard consumers, the very individuals the tax system is meant to serve.

The GST Council’s decision also raises concerns about transparency and accountability. While the Council justifies that caramel popcorn falls under the “sugar confectionery” category, critics highlighted the inconsistencies in its classification rationale. For instance, previous rulings on similar products have applied lower tax rates despite the presence of added sugar. The popcorn tax isn’t just about popcorn; it’s a symptom of underlying issues plaguing India’s GST system. It highlights the need for a transparent, simplified, and consumercentric tax regime that emphasizes fairness and minimizes bureaucratic complexity. India’s popcorn tax fiasco is not without precedent. Positive examples from other countries highlight how unnecessary India’s GST policy is. New Zealand’s Goods and Services Tax system is often hailed as one of the simplest in the world. Unlike India’s fragmented approach, New Zealand applies a flat GST rate across almost all goods and services, with very few exemptions. This simplicity reduces compliance costs for businesses and ensures that consumers are not burdened with hidden or arbitrary price hikes. The contrast is stark. Where India’s GST causes confusion and inefficiency, New Zealand’s straightforward model fosters fairness and transparency. 

The lesson is simple: a streamlined tax system benefits everyone from businesses and policymakers to consumers. The popcorn tax, criticized by industry experts and economists, is just another example of how complex classifications can stifle consumer choice. Indian policymakers should take notes from New Zealand’s playbook. By removing excessive classifications and simplifying tax rates, GST can finally live up to its promise of being a “Good and Simple Tax.” Until then, consumers will bear the brunt of a system that favors bureaucracy over practicality.

Originally published here

Beberapa waktu lalu, pemerintah Indonesia bersama dengan lembaga legislasi Dewan Perwakilan Rakyat (DPR), memutuskan untuk meningkatkan tingkat pajak pertambahan nilai (value-added tax / PPN) di Indonesia dari 11% ke 12%. Keputusan ini diambil oleh para pengambil kebijakan diantaranya untuk meningkatkan pendapatan negara guna untuk membiayai program sosial yang semakin meningkat (cnbcindonesia.com, 25/11/2024).

Adanya aturan ini sendiri terhitung cukup cepat diimplementasikan. Bila sesuai dengan rencana dan tidak ada halangan yang besar, aturan kenaikan PPN ini akan diterapkan pada awal tahun depan, yakni di bulan Januari 2025, dan tentunya akan membawa dampak yang tidak kecil terhadap pelaku usaha dan juga konsumen di Indonesia.

Sebenarnya kebijakan untuk meningkatkan PPN di Indonesia ini bukan sesuatu yang baru, dan juga sudah dilakukan dalam belum lama ini. Pada tahun 2022 lalu misalnya, pemerintah juga mengambil keputusan untuk meningkatkan PPN di Indonesia dari yang sebelumnya 10% menjadi 11% (cnbcindonesia.com, 16/3/2022).

Pemerintah sendiri menjustifikasi kebijakan tersebut sebagai langkah yang tepat untuk menjaga kesehatan Anggaran Pendapatan dan Belanja Nasional (APBN). Sebagaimana yang disampaikan oleh menteri keuangan misalnya, bahwa menjaga kesehatan APBN merupakan hal yang harus dilakukan, terutama ketika terjadi hal-hal seperti krisis dan pandemi yang membutuhkan APBN yang besar (cnbcindonesia.com, 14/11/2024).

PPN sendiri merupakan salah satu bentuk pajak yang paling umum diterapkan di berbagai negara di dunia, dan dampaknya cukup terasa langsung. Pajak penghasilan misalnya, umumnya dikenakan langsung secara otomatis saat pekerja menerima gaji dari perusahaan. Sementara itu, PPN merupakan pajak yang terlihat jelas dan dirasakan pada saat ketika konsumen membayar barang atau jasa tertentu yang ia beli.

Adanya aturan ini sontak menimbulkan kontroversi dan juga pertentangan dari berbagai kalangan, termasuk juga para pelaku usaha. Kamar Dagang dan Industri Indonesia (Indonesia Chamber of Commerce & Industry / KADIN) misalnya, mendesak pemerintah untuk setidaknya menunda kenaikan PPN yang baru sebesar 12%.

KADIN menyatakan bahwa pemerintah perlu mempertimbangkan kondisi ekonomi dan juga daya beli masyarakat yang saat ini sedang menurun. Bila PPN naik ke 12%, maka para pelaku usaha akan terpaksa meningkatkan harga jual barang, yang tentunya akan menambahkan beban kepada konsumen (rmol.id, 30/11/2024).

Bukan hanya itu, bila PPN ini ditingkakan, maka biaya material dan juga jasa konstruksi proyek akan meningkat. Dengan demikian, yang paling merasakan dampaknya adalah para pelaku usaha mikro, kecil, dan menengah (UMKM) karena margin mereka berpotensi besar akan semakin kecil (rmol.id, 30/11/2024).

Tidak hanya KADIN, organisasi Asosiasi Pengurus Ritel Indonenesia (Aprindo) misalnya, juga menyatakan peningkatan PPN ini akan memberatkan para pembeli. Saat ini, karena daya beli masyarakat yang semakin menurun, terjadi pergeseran orientasi konsumen, yang cenderung memilih produk dengan harga yang lebih murah dan ukuran yang lebih kecil (tempo.co, 17/11/2024).

Untuk produk air minum misalnya, untuk produk yang dengan harga 10% di bawah cenderung lebih laku, dan orientasi konsumen yang loyal sudah bergeser. Adanya kebijakan untuk meningkatkan PPN ini tentu akan menjadi tantangan yang tidak ringan yang harus dihadapi para pelaku usaha ritel (tempo.co, 17/11/2024).

Merespon berbagai kritik dan juga keberatan yang diajukan tersebut, pemerintah sendiri memberi keterangan bahwa kenaikan PPN dari 11% menjadi 12% tidak akan dikenakan secara membabi buta. Kenaikan ini hanya akan dikenakan kepada barang-barang konsumen yang masuk kategori mewah (cnbcindonesia.com, 14/11/2024).

Sehubungan dengan hal tersebut, ekonom dan pakar kebijakan publik UPN Veteran Jakarta mengatakan bahwa harus ada batasan yang jelas mengenai definisi dari barang mewh yang dimaksud. Jangan sampai, bila tidak ada batasan yang jelas, maka barang-barang konsumen yang juga dikonsumsi secara luas oleh masyarakat juga masuk ke dalam kategori tersebut (antaranews.com, 9/12/2024).

Bukan tidak mungkin misalnya, barang-barang seperti barang elektronik dengan kualitas yang tinggi bisa masuk ke dalam kategori tersebut. Bila hal ini terjadi, maka kelas menengah juga akan mengalami kesulitan untuk mendapatkan barang tersebut, yang mereka butuhkan untuk mengerjakan pekerjaan mereka sehari-hari (antaranews.com, 9/12/2024).

Tidak hanya konsumen, pihak pedagang pun tentu juga akan mengalami beban yang bertambah dari kebijakan kenaikan PPN ini. Para penjual elektronik di Mall Mangga Dua misalnya, yang merupakan salah satu pusat perbelanjaan terbesar di Jakarta yang menyediakan berbagai alat-alat elektronik, mengatakan bahwa mereka terkena hantaman yang besar sebelumnya karena pandemi. Bila kebijakan kenaikan PPN ini diberlakukan maka hal tersebut akan menjadi hantaman bertubi (kumparan.com, 1/12/2024).

Bahan-bahan pangan yang dianggap premium juga masuk dalam kategori produk yang menjadi target dari kenaikan PPN 12%. Beberapa bahan pangan tersebut diantaranya adalah beras berkualitas tinggi, buah-buahan premium, dan juga ikan yang berkualitas tinggi, seperti ikan salmon dan tuna (suara.com, 18/12/2024).

Padahal, konsumen dari bahan-bahan pangan yang masuk ke dalam kategori “mewah” atau premium tersebut tidak hanya dikonsumsi oleh kalangan yang berpenghasilan tinggi. Tidak sedikit pula kalangan kelas menengah di Indonesia yang menjadi konsumen dari produk-produk makanan tersebut, dan kenaikan PPN ini tentu juga akan meningkatkan beban kalangan tersebut.

Dengan demikian, maka pada dasarnya pihak yang berpotensi paling terkena dampak dari kenaikan PPN, meskipun dalam jumlah kecil, adalah orang-orang yang memiliki penghasilan menengah ke bawah. Hal ini termasuk juga orang tua penerima dana pensiun karena mereka hanya mendapatkan sepersekian dari gaji pokok ketika bekerja.

Sangat mungkin bahwa, orang-orang yang berpenghasilan tinggi dan menengah ke atas lebih banyak mengonsumsi barang-barang yang masuk ke dalam kategori “barang premium.” Namun, persentase kenaikan harga yang disebabkan oleh PPN tersebut sangat kecil bila dibandingkan dengan penghasilan besar yang mereka dapatkan.

Sebagai penutup, kebijakan publik yang memiliki dampak langsung yang sangat signifikan kepada masyarakat seperti kenaikan PPN tentu merupakan hal yang harus melibatkan banyak pihak. Jangan sampai, tujuan pemerintah untuk meningkatkan pendapatan demi membiayai berbagai program sosial justru menjadi kontraproduktif dan menambahkan beban kepada masyarakat, baik konsumen maupun produsen.

Originally published here

Large sodas, alcohol, and tobacco are just a few things governments around the world want to keep us away from. It seems governments worldwide have embraced what economists call “sin taxes” — taxes on goods considered harmful to society, like sugary drinks, tobacco, and alcohol — as both a quick fix to budget imbalance and to preserve public health. Now, as India’s Group of Ministers (GoM) considers hiking the Goods and Services Tax (GST) on these so-called sin goods to 35 per cent, there’s much to dissect about the real impact of such measures. The idea behind a sin tax is pretty straightforward: make harmful products more expensive, so people buy less of them. 

It’s about nudging us away from bad habits while boosting government funds. Take a moment to think about where that tax-generated revenue goes and whether taxes actually work. If people quit consuming these goods, the revenue dries up raising questions about whether these taxes are really about public health or just a convenient cash grab. In an ideal world, these funds would be redirected to improve public health systems, offsetting the costs associated with the consumption of these very goods. However, the reality can be far messier.

The research (Taxing Sin by Michael Thorn, 2021) suggests that these taxes fail to reduce consumption. Instead, they hurt consumers from lower income brackets, who spend a larger chunk of their income on these goods. These taxes often contribute to the growth of black markets. The artificial price hike by the government simply pushes consumers to find alternatives, often in illicit ways, instead of quitting. And while sales on the books may drop, actual consumption might not fall as much as intended. Another layer to this issue is its social impact. Sin taxes are regressive.

Studies (The Quarterly Journal of Economics) suggest that poorer consumers spend a bigger chunk of their income on taxed goods like cigarettes and sugary drinks. This means they bear a disproportionate share of the burden, potentially deepening the societal divide these taxes are meant to bridge. Tax hikes as public health measures often backfire psychologically. Research indicates that people feel more resentment towards price hikes due to taxes than other market forces. This resentment leads to noncompliance, fuelling black markets and causing government distrust among the public. Globally, implications of sin taxes show mixed results. Studies (American Journal of Health Promotion) reveal the severe gaps in policies fuelling illicit trade and broadening economic inequality among consumers. These studies underline that while sin taxes can reduce consumption and support public health goals, they must be carefully balanced against their broader socio-economic impacts. Consumers deserve better. 

It’s time to challenge the policies that undermine choice under the pretence of public health. A progressive society isn’t built on punitive taxes but on allowing people to make their own choices. Policymakers must acknowledge freedom and not undermine it. Policymakers must craft strategies that are not just economically sound but also ethically justifiable and psychologically understood. After all, the aim is to improve public health without infringing unduly on personal freedom or aggravating socio-economic imbalance. As citizens, we must demand accountability and transparency. 

The argument isn’t about just sin goods; it’s about our right to make choices without government intervention. Engaging in this dialogue is vital to ensuring that tax policies align with our values of freedom, fairness, and consumer choice, promoting a healthier and more equitable community for all.

Originally published here

WASHINGTON, D.C. – U.S. Sens. Ted Cruz (R-Texas), John Kennedy (R-La.),  Mike Lee (R-Utah), and John Barrasso (R-Wy.) today reintroduced the Chemical Tax Repeal Act to eliminate the Superfund Tax imposed by the Infrastructure Investment and Jobs Act. Sen. Cruz previously introduced this bill in 2021.

The 2021 infrastructure law imposed roughly $15 billion worth of taxes on 42 different chemicals, critical minerals, and metallic elements that are the building blocks of common household items such as plastics, rubber, concrete, soap, lightbulbs, and electronics. Texas is home to forty percent of the country’s chemical manufacturing plants, and would be heavily impacted by this tax.

Upon reintroduction, Sen. Cruz said: 

“Inflation has skyrocketed under President Biden, and his Chemical Tax would only make things worse. This tax increases prices on Texas and American manufacturers, driving up the prices of everyday household items that families need. Repealing this tax would benefit those most harmed by Washington’s out-of-control, inflation-driving spending: American families and those on a fixed income.”

Deputy Director of the consumer advocacy group Consumer Choice Center, Yaël Ossowski, said:

“In a time of persistent inflation and escalating trade wars, we must do everything we can to ease imposed burdens and costs on consumers. Repealing taxes on necessary chemicals and components — all pivotal to American manufacturing, domestic production, and increased competition — is a great measure that will go a long way in making lives for consumers just that much easier. We praise any efforts that help make products and services more affordable for American families.”

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