Progressive Taxation in Global Context: HR & Finance Legislation

Prof. Vijay Joshi Progressive Taxation, HR & Finance Legislation in Global Environment

Progressive Taxation – What is it? • Canons of Taxation • Public Finance • Methods of achieving Progressivity • HR Legislation in India and Global Governance • Finance Legislation and Developments • Progressivity – Way Ahead • Introspection – Role of Payroll Professional Contents

A tax by which the rate of taxation increases as the taxable amount increases. Adaptable to individual taxation or tax system as a whole, a year or otherwise. Attempts to reduce the tax incidence on people with lower ability to pay by shifting higher tax incidence on people with a higher ability to pay. Progressive Taxation

Indicates a situation leading towards better position, as regards better location, higher achievement, more resources etc. • In relation to tax, it indicates gradual increase in rates or amount payable by way tax in comparison to the taxable income. Progressive

Before we proceed to answer the above question, let us understand the ideal method of taxation. • Tax is a levy or financial charge by state. • Tax has a long history dating back to at least 3000 BC – 2800 BC with reference from Ancient Egypt. • Vedic scriptures also have reference to taxes. Progressive – Why?

Tax is collected and spent by state (Government). • It forms part of ‘Public Finance’. • Public Finance has both normative and positive elements moving between theory and practice. • Economists have been trying to find ideal solution to different situations. Public Finance

Adam Smith has propounded the following criterions of good taxation – • Equitable • Convenient • Certain • Economical Canons of Taxation

Progressive Taxation satisfies the requirement of tax being equitable. Nations all over the world are trying to be as equitable as possible in the matter of taxation, HR as well as Finance Legislation. Equitable

‘It was only for the good of his subjects that he collected taxes from them, just as the Sun draws moisture from the Earth to give it back a thousand fold”- - - Poet Kalidas in Raghuvansh eulogizing KING DILIP Method of Collection of Tax

Who should bear a society’s fiscal burdens? • How progressive burdens should be? • Whether focus of progressivity should be throughout the income distribution or primarily among the poorest? • Unfortunately, there is no simple, right answer. Progressivity

Different methods

One of the ways of levy of tax is also to decide a minimum amount that shall be paid by the subject to government by way of tax. • This is called ‘Minimum Tax’ and is usually levied to bring some parity amongst different incomes or deductible expenditures. • In India, we have Minimum Alternate Tax (MAT) payable by Corporates. • It may lead to some complications in levy and collection. Minimum tax

Alternative mechanism for specific object of restricting or permitting entry of goods in the state. The object also could be to curtail specific practices, like levy of tax on emissions polluting environment. Qualitative Restrictions

"Is it possible that our best intentions for labour are not actually met by laws that sound progressive on paper but end up hurting the very workers they are meant to protect?" – Prime Minister Shri Manmohan Singh at 43rd Indian Labour Conference on 23rd November 2010 at New Delhi

HR legislations are also expected and striven to be equitable. • Object being to achieve social equity, curb the exploitation of weaker section, fill gender inequality and seek upliftment of downtrodden. • Various laws can be cited as an example. HR legislation

ILO was created in 1919. • Initially, its object was to eradicate slavery and all forms of forced labour. • Later agenda was expanded to include, rights to freedom of association, collective bargaining, non-discrimination in employment, elimination of child labour, etc. • In 1998, ILO Declaration on Fundamental Principles and Rights at Work that binds 175 ILO members. HR legislation

Globalisation has given birth to new area of concern for all. Whether Global Trade should include or ignore Global Governance in HR? WTO also plays an important role. Global governance and development of trade and labour standards

Global meltdown of 2007 has seen older institutions simply vanish. Many leading economies were on the verge of collapse. Governments, Central Banks and Economists have been trying to work out solutions and the efforts are still continuing. Finance legislations

Every country had to redraft and redesign its Finance Legislations to impose certain restrictions and find way sand means to dilute the impact of losses. • It is well understood that the role of Finance Act is to ensure that the State’s finances are stable. • Countries have been making ways to restructure their finance legislations to achieve stability. Finance legislation

Whether there has been any progress Globally since last about 100 years? • Have the failures of financial institutions could have been avoided? • What was responsible for failures? • Have we failed to learn from past mistakes? • Has ILO achieved in its objectives? • Has exploitation, child labour and discriminations have stopped? Progressivity – way ahead

Solution lies not only with Governments, Economists and Corporates, it also lies with you, me and every one of us. • Payroll Professionals have a great future ahead since they can add value through the service and expertise. • Payroll Processing indicates lot of areas of idle wages, misuse of time, wastage of resources and savings at every levels. Introspection-payroll professionals

Payroll Professional can also play a role of reducing frictions in HR, achieve co-ordination amongst finance, accounts and time management. Proper exploitation of Payroll Professional’s competencies can work wonders in an organisation, even in a case where human resources are paid flexibly. Introspection-payroll professionals

Equity and fairness are backbone of life’s success. • It is not impossible, though may be difficult. • In India, we call it ‘vasudhaivkutumbakam’ meaning the whole earth is one family. • If we have achieved peace and prosperity with reduction in frictions, I think we may call it a first step towards Progressivity. Progressive taxation, hr & finance legislation

Progressive Taxation in Global Context: HR & Finance Legislation