Tuesday, February 5, 2013

Is private-public-partnership in income taxation the way to development?

Recently I wrote a an article criticizing the Indian media’s shallow coverage of the Maha Kumbh Mela, where the event was reduced to yet another congregation of weirdos. In contrast, blogs, pictures and videos put up by pilgrims and visitors provided a better perspective of what the mela is to different people. A popular reporter also said in her column that events like the Kumbh mela succeeded without much government supervision because pilgrims/ visitors shared similar emotional sentiments (of piety, devotion and spiritualism) and felt responsible to ensure that nothing unpleasant happened.

(Image Courtesy: www.newsleaks.in)

My friend’s brother wrote an article on police apathy and how policing can be improved through private-public partnership. This was in the background of the recent unfortunate incident in Delhi and subsequent protests by people that highlighted the police attitude towards victims (particularly women) and their unwillingness to register an FIR. The article spoke about how greater private sector participation can improve things.

Both articles indicate the decreasing clout the government is likely to enjoy in the coming years as the public starts expecting results. The primary reason the public depends on the government is for its low prices of goods and services, followed by law and order. But as the taxpaying public is increasingly witnessing, the government is unable to deliver on basic needs like water, infrastructure, health care and education for them and their families.

Taxpayer money today is mostly spent giving out subsidies to the poor without encouraging them to move towards self-sustenance. This would have been relatively understandable if tax payers were extended special privileges such as immediate issue of ration card (irrespective of the number of years of domicile), faster processing of documents at government offices, preference in allotment of land etc. This was indeed the process followed in the days of Kings so as to ensure that the rich did not rebel and the poor aspired to grow out of poverty. (I am discounting the ills and prejudices brought upon the poor due to the caste system here, just to keep the argument theoretically focused.)

Considering the government is unlikely to extend any such privileges nor improve the way it delivers on basic amenities, would it help if one split the income tax paid between the government and private parties who can bring in the much needed efficiency to deliver the goods?

Consider this example. If residents of a particular street/ area took special interest in maintaining that street/ area well and paid the larger portion of their income tax to a community based entity that could help them maintain the street well, would the model work? At least people would have the satisfaction of knowing that their money was used for visible results. Imagine if the same situation was extended to various spheres such as healthcare, education etc. The costs could be kept low by clubbing 1-2 areas to have a hospital or school. Because the community has a sense of responsibility (not unjustified entitlement as is the case today with some segments of society), they would also have low tolerance to corruption, theft and other social ills. Also depending on the improvements necessary, the income tax collected from people could vary each year, similar to what happens in a private housing society that manages the property by charging a fixed maintenance fee to all owners for efficient functioning.

In such a scenario the government’s role would be reduced to that of a facilitator and for that the public can pay it a small share of the income tax. That way the government too gets encouraged to keep its overheads low.

This model can be extended to corporations also who can support the development of their respective regions thereby avoiding skewed growth patterns across the country.

Knowing the politicians and bureaucrats who have grown fat and powerful ruling this country on public money, they would never allow something like this. But who said one is not allowed some wishful thinking?

What are your views on such a model?