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Q. Rich farmers need to be taxed: Discuss the issue of taxing on rich farmers.
May 02, 2017 Related to : GS Paper- 3

Ans :

Introduction-

Bibek Debroy, member of NITI Ayog has put proposal of taxing on agricultural income above a particular threshold has led to a public exchange of views. Even though the government has quickly dismissed any such plans of taxing agricultural income, but many policymakers have begun to voice their opinion, the latest being Chief Economic Adviser Arvind Subramanian who made it clear that taxing farm income falls under State list.

Why Rich farmers need to be taxed?

  • Currently, India’s tax base stands at a minuscule 5.9% of the working population, is lowest among the world. This unnecessarily burdens the more formal sectors of the economy that are already overtaxed.
  • Low tax base handicaps government spending on the social sector, hence there is an urgent need to expand the tax base.  
  • In India, there is wide presence of rich farmers with handsome farm income, hence there exist a strong justification for taxing them in order to widen the country’s embarrassingly narrow tax base.
  • The common image of farming being a poor man’s venture and the sizeable vote share that farmers enjoy have made the idea of farm taxes a political taboo. 
  • The frequent distress faced by poor or marginal farmers, which could be attributed to structural issues other than taxation. Policy makers should urgency in addressing the structural issues that farmers are facing.
  • Hence there is strong case for treating agricultural on par with other sector. The rich farmers having sizable income (above some threshold limit) must be brought under taxation. 

Conclusion-

The recent proposal made by Bibek Debroy on taxing on farm income has laid to debate on the subject. Treating rich farmers on par with other sector players and taxing them makes sense, considering the very narrow tax base of India. In this backdrop government should initiate debate and get larger opinion on all sections of society. 


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