Sin Tax: you get taxed for sinning!!

Tax is a charge that is imposed in taxpayers, individual or legal entities bt the government to fun various public expenditures. The meaning of sin tax can be easily taken from the words itself. It is the tax you pay to the Government for doing an activity that is considered sinful or is widely disapproved of in the society. They are levied to discourage activities considered sinful by the society and to get Government funds.

Sin Tax is usually used for two major reasons:

• To increase the price of the product which in turn would reduce affordability and consequently reduces the use of that product.
•  Sin Tax is levied as a fine for the damages that are caused to society by use of these goods.

Levying of Sin tax is more popular than other tax and is usually recommended Sin to fill the gaps in the budget. Tax collected in turn is used to expand infrastructure or to run rehabilitation or support from people who have suffered from use of the product.

However the fact remains that Sin taxes can’t raise revenue unless people keep on using the product, and the taxes are useless if it can’t save lives or discourages people to avoid the product. There remains a conflict of goals between of increasing Government revenue to compliment Government spending and discouraging people to do sinful activity.

Sin tax however indirectly affects the general public. Farmers are involved in farming of products using in manufacturing such products also is hampered. In India farmers of tobacco will bear the brunt of the increased taxes on cigarettes. Let’s say if the price of tobacco product is very high in India smugglers will start bringing in cheaper products from other countries. India would lose out the revenues and would result in a huge pool of black money. These unforeseen problems which might jeopardize the country’s economy and Government might no longer be able to fill the deficit.

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