Budget – 2016- One serious blunder
I am going to write on one of the blunders in it. But before I do so I need to explain that I am the chairman of a liquor manufacturing company. I do so because of a curious psychological feature in this country. I find that many, if not most, of us tend to pay more attention to the messenger than the message.
As a consequence if a person connected with the liquor industry (like me) were to make some point in connection with it, the veracity of what he says would tend to be discounted on the grounds of self-interest. I am declaring my interest to preempt potential critics. My hope is that the intelligent reader will be able to examine what I am about to say critically without any bias, unaffected by who I am. This should not be too difficult if a steadfast attempt is made.
The latest budget has proposals that would give an enormous boost to the illicit liquor industry. Every previous budget has done it to some degree but this one has gone overboard by increasing the level of taxes and excise duties so sharply that the price of arrack, for example has gone up by more than Rs 200 per 750 cc bottle.
Now you may well ask, what of it. The fact is that it will result in a massive loss of revenue on the one hand, and a great increase in expenditure, on the other. Let me explain.
There are certain fundamental painful facts that we must accept. The poor will never give up intoxicants altogether. Not all the Buddha’s teachings or the exhortations of monks will ever succeed in their denying themselves the comfort and solace of a tot after a hard day’s work. It is one of the few pleasures that they have. This is a sad fact that only do-gooders, lacking empathy, would deny. The masses, when legal arrack is made unaffordable, will inevitably turn to readily available Kassippu — there is nothing else left for them. One does not need to be an Einstein to understand this. It is well known to the cognoscenti that the biggest donors to the temples are the mudalalis. Their cherished hope is that our Buddhist Leaders will succeed in bringing about Prohibition. That would be the day! Those who think Prohibition would be a good thing are ignorant of the history of Prohibition in America. It ushered in a massive crime wave of bootlegging, murder and organized prostitution in 1920 that abated only after it was repealed in 1933. The Mafia and other criminal gangs that Prohibition spawned continue to bedevil life in America even now.
Government policy in this country has given such a boost to Kassippu that it has resulted in the illicit liquor market growing to at least four times the size of the legal market. It was so in 2008 (when I wrote an article on ‘The Kassippu Industry and Corruption’) and would almost certainly be greater today. To give you some idea of the behemoth that government has fostered (unwittingly) a few facts would suffice. While legal outlets for arrack were in the region of 2000, illicit outlets were over 200,000 ! Since the illicit industry does not pay tax it was estimated (in 2008) that the annual loss of revenue to government was about Rs 58 billion! It may be over Rs 100,000,000,000 today. It is anybody’s guess, but the figure would be colossal, and would certainly make a difference to the Budget. We can imagine the Treasure Chest that the Kassippu mudalalis have for corruption! The regular raids conducted on iflicit breweries that are highly publicized are a laughable pinprick to the industry.
Having dealt with the revenue that government is losing every day, I shall turn to the increased expenditure as a consequence of Kassippu consumption. Kassippu is a deadly concoction consisting largely of methyl alcohol, a poison. It causes death, blindness, and illness. The cost of medicines and treatment must be very substantial. I have no figures for it, but once again it is certain that it must be large.
The mystery to me is why the government is so contradictory and confused in its policies. In the case of personal and corporate taxation it has accepted the fact lower taxes result in larger collections through greater compliance. However when it comes to the taxation of the liquor industry it takes the opposite tack. It should be obvious to any reader that lower taxes on the legal sale of liquor will result in less loss of revenue through increased Kassippu sales. Every time a bottle of Kassippu is sold it results in loss, directly and indirectly, to the government.