Kerala’s Finance Minister Dr. T. M. Thomas Isaac has just announced a hike in welfare pensions in his Budget for 2008-09. With this, the pensions would go up to Rs. 200 a month (Rs. 2400 annually).
He has sought to raise money needed for this (Rs. 1000 millions) by imposing a cess of one per cent on sales and value added taxes. Kerala has over 30 million people. So, on an average, every citizen will be required to pay about Rs. 33 as cess in a year for paying the increased quantum of pension.
The total tax revenue of the State excluding taxes on income and expenditure, property and capital transactions is over Rs. 15000 crores. This works out to be an average tax burden of Rs. 5000 a year on the citizen. This would be the tax someone in the middle-income group actually pays. The poor will be paying much less. However, it would not be much less than the pension amount of Rs. 2400 a year!
The poor contributes a portion of the taxes on property and capital transactions (2600 crores) and non-tax revenues (Rs. 1300 crores). This is not taken into account here.