– By Arvind Kumar Yadav
Every time we drive on a well-lit highway, send our children to a public school, or feel secure knowing our soldiers guard the borders, we are witnessing the invisible power of taxes at work. Taxes are the price we pay for living in a civilised society. Yet, in India, conversations around tax often carry a sigh, a complaint, or worse, a desire to escape it.
“Why should I pay tax when I get nothing in return?” is a question whispered in millions of households every year. But imagine an India where everyone paid tax honestly and the government, in turn, transparently showed where every rupee went from a rural health centre in Bihar to a digital school in Kerala. That India would be a place where trust, not suspicion, defines our relationship with governance.
This article explores why tax should be paid by everyone, not just as a legal obligation, but as a shared moral and civic responsibility and how this can rebuild transparency and trust in the Indian tax system.
Understanding India’s Tax Reality
India’s tax structure is based on two pillars: direct taxes and indirect taxes.
Direct taxes, such as income tax and corporate tax, are paid directly by individuals and businesses. Indirect taxes, like GST (Goods and Services Tax), are paid when we buy goods or services.
According to data from the Ministry of Finance (2024), India collected around ₹20 lakh crore in direct taxes and about ₹15 lakh crore from indirect taxes in FY 2023–24. Together, they make up the financial backbone of the nation.
However, despite being one of the world’s largest economies, India’s tax-to-GDP ratio remains around 17%, much lower than countries like the UK (33%) or France (45%). This means a large portion of India’s workforce either doesn’t pay taxes or operates in the informal, unaccounted sector.
In simple terms: too few people carry the tax burden for too many.
Why Everyone Should Pay Tax
Let’s set aside legality for a moment and talk about logic. Why should every earning citizen, regardless of profession or background, contribute a fair share?
Here are 10 reasons why tax should be paid by everyone:
- Taxes build the nation’s infrastructure. Roads, airports, and power grids — all run on taxpayer money.
- Taxes make social justice possible. They fund welfare schemes that lift millions out of poverty.
- Taxes pay for safety and security. From police to armed forces, it all runs on public revenue.
- Taxes ensure quality healthcare and education. Public hospitals and schools rely on tax-funded budgets.
- Taxes build trust between citizens and government. A paying citizen has the right to question spending.
- Taxes promote equality. Progressive taxation ensures the rich contribute more to support the poor.
- Taxes reduce corruption. When everyone pays, there’s less room for evasion and manipulation.
- Taxes attract investment. A stable, transparent fiscal system reassures global investors.
- Taxes empower local governments. Property and municipal taxes help cities serve better.
- Taxes strengthen democracy. A tax-paying citizenry is more engaged, aware, and responsible.
When more people pay their fair share, the system becomes fairer for all.
Tax Chori – A Silent Threat
The word “tax chori” (tax evasion) might sound casual, but its impact is anything but. Every act of evasion from underreporting income to hiding business profits chips away at the country’s foundation.
Tax chori is not smartness; it’s stealing from one’s own nation.
According to the National Institute of Public Finance and Policy, India loses nearly ₹7–9 lakh crore annually to tax evasion and fraud. That’s more than what we spend on healthcare and education combined.
Examples of Tax Fraud in India:
- Fake GST invoices: Companies creating false bills to claim tax refunds.
- Benami property ownership: Hiding wealth under someone else’s name.
- Corporate underreporting: Inflating expenses to reduce taxable income.
- Charity misuse: NGOs claiming tax exemptions while misusing funds.
These crimes don’t just drain the treasury they destroy public trust. Honest taxpayers feel cheated when the dishonest get away.
Tax Fraud vs. Tax Evasion: Know the Difference
While the terms often overlap, there’s a fine legal distinction:
- Tax Evasion: Illegally avoiding taxes by underreporting or hiding income.
- Tax Fraud: A criminal act involving deception falsified records, forged receipts, or fake accounts.
Under the Income Tax Act, 1961, deliberate tax fraud can result in penalties up to 300% of the amount evaded and even imprisonment up to 7 years.
In countries like the U.S. and UK, tax fraud is treated as a felony, a serious crime. India is slowly adopting a similar zero-tolerance approach, but enforcement must be consistent and data-driven.
Why We Pay Tax – The Real Benefits
Beyond numbers and laws, taxation has a deeper purpose.
We pay tax to maintain the social contract, the unwritten agreement between the government and its citizens. In return for our taxes, we receive protection, stability, and development.
Here are 5 core reasons why we pay tax in India:
- To fund public goods, roads, defence, healthcare, and education.
- To support welfare, pensions, subsidies, and safety nets.
- To reduce inequality, enabling redistribution of wealth.
- To maintain law and order, the judiciary, police, and administration.
- To sustain democracy, empowering citizens to demand accountability.
As simple as it sounds, taxation is the glue that holds society together.
The Trust Gap: Transparency as the Cure
One of the biggest reasons many Indians avoid paying tax isn’t greed, it’s distrust. People feel their money is misused or never reaches the public good it’s meant for.
Transparency is the cure.
Imagine if every taxpayer received an annual “Tax Utilisation Report” showing how their contribution helped fund rural schools, clean water programs, or hospitals. Suddenly, taxes wouldn’t feel like a burden; it would feel like belonging.
Countries like Sweden and Norway already do this. Their citizens not only pay high taxes but do so proudly, because they see clean governance and visible returns.
India has made progress through GSTN, Aadhaar-PAN linkage, and e-filing portals, but true transparency will come when citizens can trace the journey of every rupee.
A Visionary Idea – Salary-Based Tax for All
One visionary concept gaining attention is simplifying the entire system into a salary-based tax model.
In this system:
- Everyone’s income (formal or informal) is recorded digitally.
- Tax is deducted at source (TDS), the employer pays it directly to the government.
- No indirect taxes like GST are required on basic goods.
This approach ensures that tax is paid before income reaches the individual, minimising evasion. It’s fair, simple, and transparent, though challenging to implement across a diverse economy like India’s.
The idea isn’t to enforce it overnight, but to spark discussion on a cleaner, smarter way forward.
When Tax Is Paid by Employer: The Power of Automation
The concept of “tax paid by employer on behalf of employee” already exists in India’s TDS system. If expanded nationwide and linked to digital payrolls, it could close loopholes in cash-heavy sectors.
Every transaction would be recorded, every payment traceable, and every taxpayer accountable, not through fear, but through fairness.
Building a Culture of Tax Honesty
Tax compliance isn’t just about enforcement; it’s about culture.
In Japan, people line up to pay taxes voluntarily. In Nordic countries, tax records are public, anyone can see how much their neighbour contributes. The result? High compliance, low corruption, and deep trust in governance.
In India, we need to move from fear-based compliance to trust-based participation.
That starts with:
- Educating citizens from the school level (“Why we pay tax to the government – Class 10” should be real-life, not theoretical.
- Publicly recognising honest taxpayers.
- Showing visible local improvements funded by tax money.
When citizens see the link between tax paid and benefit received, compliance becomes automatic.
Advantages and Disadvantages of Paying Tax
Advantages:
- Strengthens national infrastructure and welfare systems.
- Creates fairness in wealth distribution.
- Builds international investor confidence.
- Gives citizens the moral right to demand accountability.
Disadvantages (in perception):
- Misuse of funds due to corruption.
- Complex procedures for small businesses.
- Uneven enforcement: punishing the honest while the powerful escape.
The solution isn’t to avoid paying tax, but to fix the system that misuses it.
Tax Fraud and Its Punishments
Tax fraud isn’t victimless: it’s theft from every citizen who pays honestly.
Under Indian law:
- False statements or fake invoices: 100–300% penalty of the evaded amount.
- Willful concealment: Up to 7 years of imprisonment.
- Corporate fraud: Possible business closure and property seizure.
Famous global cases from the Panama Papers to celebrity tax scandals prove that evasion eventually catches up. The punishment is not just financial; it’s reputational and moral.
From Tax Fear to Tax Pride
For too long, India’s relationship with taxation has been transactional. Pay what you must, hide what you can, and complain about the rest.
But imagine flipping that narrative, where paying tax is a badge of pride, proof of contribution to a growing, transparent India.
When the government is accountable, and citizens are responsible, taxation transforms from a burden to a bridge, connecting individual effort with collective progress.
A Balanced Vision: Not Enforcement, But Evolution
This isn’t a call for aggressive enforcement or surveillance. Instead, it’s a visionary perception: that an evolved, transparent tax system can unite the nation under fairness.
Let the conversation shift from “Why should I pay tax?” to “Why shouldn’t everyone?”
Let tax be viewed not as punishment, but as participation, a moral and economic investment in India’s future.
Because a great nation isn’t built by those who avoid responsibility, but by those who share it.
Also Read: Why Revisiting Your Resume Is Important (Even If You’re Not Job Hunting)
The Future of Trust
India stands at a financial crossroads. We are the world’s fastest-growing major economy, yet among the least taxed proportionally. To sustain our rise, we need not higher taxes, but higher honesty both from citizens and from government.
The future of India’s prosperity depends on one simple belief:
Tax is not a penalty; it’s a promise, a promise of a better tomorrow, funded together.
Also Read: Do E-Rickshaws in India Need Stricter Rules
When everyone pays their fair share, corruption shrinks, trust grows, and democracy matures. That is the India we deserve, transparent, fair, and united by shared contribution.
