The traders’ strike over value added tax has to be strongly condemned. VAT is a benign way of increasing the tax-GDP ratio without increasing the tax burden on the consumer. It hinges on increasing tax compliance. By removing the cascading effect of taxes, it reduces the element of tax in the price of goods and thus brings down prices. A large part of India’s GDP, such as agriculture, is already out of the tax net. A large part of trade is informal and remains out of the tax net. This increases the burden on the honest tax payer.The opposition to the VAT regime is in essence an opposition to honestly paying taxes. More and more manufacturers would prefer to switch to this regime because they get tax refunds on the amounts already paid as taxes. In other words, the VAT regime is friendly to those paying taxes, and unfriendly to those evading taxes. Genuine problems in the VAT regime, such as those related to lists, rates and refunds can and should be solved by the government. The empowered committee on VAT has shown its willingness to address these issues as soon as possible. A review of the working of the system, including that of rates, will be done in three months’ time. But the militant stance of the traders shows that they do not want to cooperate in setting up a proper, workable system. This pits them against the honest citizens of the country who pay their taxes. It pits the white economy against the black economy. Every right-thinking citizen of the country must, therefore, condemn such pressure tactics. Harassing citizens by closing shops and petrol pumps is bad politics and will not work. It will fail, just as the truckers’ pressure tactics had failed.One way to ensure that the country is not held to ransom by people who do not wish to pay taxes is to bring the retail sector into the formal sector, and to increase the share of the formal sector. While the local shop does not provide a receipt, the supermarket does. The entry of FDI in retail is one step that will bring trade into the white economy. Today, wholesale plus retail trade constitutes 14 per cent of GDP. The efficiencies offered by foreign companies will help put pressure, reduce prices and improve services, all of which will help win over the black economy. The traders’ strike strengthens the case for bringing FDI into retail. No doubt when this is done, traders will strike again. But the vested interests of special groups should not be allowed to bring the country to a standstill. Or hinder its progress.
