Not making a case for taxation of farm incomes.
TL;DR: Taxing farm income would have great economical and sociological impact and is not advisable at least, in India !
In the hinterlands of Marathwada, today morning, as the people would be scrambling with their buckets and containers to get their daily fill of water, they would have smiled, if they had a chance to look at today's daily newspapers.
Finally, after two disappointing years and causing a lot of misery, the monsoon is expected to be above normal (106%), and this has not been predicted by IMD only, but by Skymet also, which has been leading over the accurate predictions compared to the government organisation.
Hope are building for all sectors related to agriculture, but that would be such a cursive statement
Farm and allied sector account for 14% of India's GDP and 49% of the workforce is employed in agriculture. Enough for food for thought, right?
Yesterday, there was an article in business daily, "Business Standard" by Mr.Ishan Bakshi, advocating for the taxation of farm income.
Even germinating this very thought in the head, is excruciatingly painful.
Except for few professions which has a sustainable income like a salaried job, most of the enterprises which a human being endeavors is fraught with inherent risk of failing periodically, due to innumerable reasons, external and internal.
There are so many risky business in this world, like flying a rocket or making electric cars,and thats why only the crazy ones venture into them; but there is a riskier enterprise, in which millions venture every single year,and thats agriculture.
If one just would list down the number of factors that could contribute to failure of an agricultural enterprise, it would be a very humbling feeling, that how year after year, millions of people stare down the abyss, if not more...
1. Lack of rainfall
2. Excess rainfall
3. Untimely rainfall
4. Pest epidemic
The above are some of the major factors leading to loss of income or failure in an agricultural enterprise, and above all there is nothing that could be done to mitigate the damage, absolutely nothing.
How would you feel, if one would slog for an entire year and is not paid salary and in fact has to borrow to fend for herself and the family?
Some people from erstwhile Kingfisher Airlines probably know this.
But thats a very compassionate argument, might not hold the case, as many of the business also have uncertainty associated with them, usually only one "lack of demand" .
So, lets examine the arguments put forward by Mr.Bakshi in support of the case for taxation in income:
10.5% of households own land in excess of 5 hectares, and of these a roughly third own a motorcycle or a scooter and 7 percent own a scooter and surprisingly 6 percent own a car.
There would be few CEOs of the country who might be actually unhappy with the argument of Mr.Bakshi, after all they focus so much on rural sales. almost all big companies have separate sales and marketing divisons for rural customer.
In years, where our humble farmer has a good crop, she buys certain durable and non-durable items for herself and her family.
And all these items, directly and indirectly contribute to the taxes kitty.
In case of a crop failure, the crop insurance and other subsidies are so pitiful that farmers are forced to commit suicide, just so that they can bring some money to their family's table, after they claim his death compensation.
While lakhs of crores are being held by wilful defaulters, waiving of farm loans becomes such a big pain in the ass, that it is never taken in to account.
While there is certainly a case to tax incomes of corporations who indulge in agriculture, taxing farmers would be penny-wise, pound foolish.
Mr.Bakshi has just one side of the coin,and thats the financial. There are several sides of the coin, including sociological.
What happens, if farmers start selling their land-holdings en mass and migrate to cities (which is already happening) just because, there is not much incentive left after the taxation, to go all though that pain, toil and uncertainty.
The inherent business model of farming is laden with so much risk that, even the corporations might successfully argue to exempt them from farm incomes, in case this move gains some thought. Else, they can also go and start something new, having smaller risk bets.
There would always be loopholes, but it would be ill-wise to go ahead and tax farm incomes.
PS: This article was written in one sitting and is not edited.
Vagrant use of statistics was dissuaded.
Image courtesy - Pexel under CC0 license.