Tuesday, January 5, 2010


In FY 2007/08, it costs Rs155 million to remove 41% of individual tax payers temporarily from the tax net. Temporarily, because they will eventually migrate back to that net as their incomes increase. Hopefully. Compare that to the Rs130 million government collected on interest income in the same year. So it's pretty much I give you with one hand and take back with the other kind of stuff.

In fact government must have taken back far more than it has given when you analyse the numbers. If we divide the Rs25 million difference by the 36,600 tax payers removed from the tax net (2007/08 budget speech) we get Rs683 saving per tax payer. That's assuming that people who got off the MRA net paid tax on their interest income. Some must have. Some for sure didn't.

Others probably moved down a few rungs on the social ladder when they didn't get the 50% subsidy for the SC/HSC fees. It didn't matter if you weren't affected by the latter subsidy because you could still be ripped off with abusive petrol and electricity prices which would also make sure everything else in the economy cost more than it should reasonably have. Or maybe you paid an exorbitant price for a 20-minute air trip. All of that was before a depreciating rupee was thrown in for good measure.

Still surprised that the savings rate is less than 12% these days?

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