The advantages from the government's point of view of an earthquake surcharge on income and corporate taxes are that it is the quickest way of raising funds just now and the easiest. It was too good an opportunity to miss at the fag end of the financial year and the government has seized it. Nothing more difficult than the drafting of an ordinance is required to ensure an additional Rs 1300 crore will flow into the government's coffers by the end of March. Since the surcharge is small, two per cent, most people will not really begrudge it. But the surcharge raises the question of whether special taxes levied during national emergencies should be allowed to become a permanent feature and a substitute for tough resource-raising efforts. Specifically, the Kargil surcharge should not continue next year simply because it is there. Instead, the government should look for revenues from stimulating faster economic growth, by pursuing disinvestment and casting the tax net wider. The case for lower taxes remainsstrong, perhaps stronger at this time of slow growth and global uncertainty. Among other things, lower taxes stimulate demand and ensure better tax compliance. An accumulation of surcharges is putting the highest marginal rate of personal tax close to where it was in the mid-1990s. That is not a promising scenario for revenue collection.It is only a coincidence that the figure of Rs 1300 crore comes close to what Gujarat chief minister Keshubhai Patel has estimated is the requirement. Neither he nor anyone else has a realistic idea at this juncture of what will eventually be needed to rebuild whole towns and villages from the ground up. The final sum will likely be severalfold higher than Patel's guesstimate. Private donations in cash and material coming in from all parts of India and the world will be very useful in relief operations. For reconstruction, there are three sources of funds, the public and private sectors and multilateral loans. The World Bank and Asian Development Bank have already committed $600 million between them and promise more will be available when precise requirements are determined. Substantial investment will be available from the private sector once plans and policies for reconstruction are announced. The Union Cabinet appears to be in several minds but the prime minister who has seen some of the devastation atfirst hand says more tax and non-tax resources will be raised. Either way the pinch will be felt. But people will be readier to bear it if assured that the money will be well spent. Judging by the disaster management capabilities of the Gujarat government, the tasks of reconstruction are likely to overwhelm it. Rebuilding Kutch and other parts of the state will be enormously taxing and the state evidently does not have the requisite planning and organisational resources. High priority should go to creating a reconstruction commission on which state and central governments, development experts and the private sector can be represented. Cutting out waste and corruption and transparency in the disbursement of funds and choice of projects are essential as is the participation of all the affected people.
