Sources have revealed that the Finance Ministry might introduce the sin tax as part of the proposed...." />
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Enjoy alcohol, cigarettes? Be prepared to pay govt’s new ’sin tax’


Mangalore Today News Network

New Delhi Nov 30, 2015 : Sources have revealed that the Finance Ministry might introduce the sin tax as part of the proposed GST regime; experts are sceptical that the tax will discourage consumption.

 

sin tax


They are calling it warnings from heaven. God-fearing Indians will soon be reminded they are committing a sin while purchasing products like tobacco and alcohol, or indulging in gambling, considered bad for health or society.


The new move, a safer push than the recent beef controversy, could come through a special ‘sin tax’ that aims to usher a uniform, indirect tax regime across India. Encouraged by its success in a host of countries, the BJP-led NDA government is contemplating the move, which, interestingly, has the backing of all political parties.

The NDA is not the first government to push the envelope. The previous UPA regime had once debated the issue through a proposal from the then Planning Commission in its 12th plan document (2012-2017), submitted to the National Development Council (NDC), which was presided upon by the then prime minister, Dr Manmohan Singh.

It was proposed as a package of policy interventions to combat India’s non-communicable disease burden. The primary motivation was to aid public health spending, especially towards de-addiction, motivation and awareness.

But it didn’t work. “Alcoholism and tobacco-related deaths are on the rise, it’s a huge burden on the country’s medical bill,” says Narendra Taneja, head of the BJP Economic Affairs Cell.


The Finance Ministry, it is reliably learnt, has already circulated a note on the idea of pushing alcohol and tobacco industries to pay more towards an additional ‘sin tax’ under the proposed pan-India Goods and Services Tax (GST) structure.

Among responses sought from various parties, one question is particularly interesting: whether there would be a backlash from corporate India if tobacco and alcohol products are described as ‘sinful’.

“I wonder whether those into tobacco or alcohol will look into this aspect of sin; they will consider it as an additional tax. The government will pick up some extra cash,” said noted sociologist, Dr Ashish Nandy, adding, “Extra taxes have never deterred consumption of any product in India.”

Finance Ministry insiders claim the rate at which this tax would be levied under the proposed GST regime has not been finalised but the government is very upbeat on the move. The ministry is currently seeking inputs from the industry and other stakeholders at national, state and local levels on the GST.

“Everybody is getting a chance to interact with the ministry so that we get clarity on the concept,” claim ministry sources. Nothing is set in stone so far, and the proposals are drafts as of now. After making necessary changes based on suggestions, a final report will be submitted before the GST council before the final law is framed.

There are other issues as well. Not all research supports the idea that alcohol and tobacco consumers financially burden societies through health expenditures.

“This is a proposed intervention that the government is considering. The Health Ministry had proposed the same during Dr Harshvardhan’s stint, to raise funds towards de-addiction measures, motivation and awareness,” says Dr Amir Ullah Khan, a seasoned economist and a consultant with the Bill and Melinda Gates Foundation.

The Public Health Foundation of India has also been pushing for the same, in its advocacy efforts with the health ministry. This kind of tax is often used by governments to increase their tax revenues, as people generally refrain from opposition to such levies, as they are indirect in nature and affect only the end users.

When individual states run deficits, the sin tax is typically one of the first taxes recommended by lawmakers to help fill the budget gap. While all countries have it in one form or the other, prominent examples are Japan, Australia, New Zealand, Singapore, and the Philippines.

The country last named has done wonders with the sin tax, collecting exclusive funds for public health spending from this source, which also helped Manila bring down consumption of these products.

But Khan has a word of caution — sin taxes have, historically, triggered rampant smuggling when they create a huge price difference between neighbouring jurisdictions. “It discriminates against the lower classes; poor people pay a greater amount of their income as tax.

And if the poor end up paying more tax, then the entire purpose of this tax would be defeated. The government needs to be very careful with this one,” Khan explained. The last word has not been said on this one.

Courtesy:Mid-Day


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