I Pay So Much Tax Money, Where Does It Go?
An explanation of the government budget and how it spends tax revenue collected
Every time I get my salary, some money is reduced because of tax. Every time I buy my groceries I pay extra because of tax. Taxes make petrol more expensive. What happens to all my tax money? Where does it go? Why should I pay taxes?
Whenever you pay tax, this money goes to the government and helps the government spend on many things that help run the country and help its citizens. Government spends it on things like making roads, hospitals, schools, giving money to smaller businesses or to farmers. Whenever we get our salary we divide it to pay rent, buy food, buy clothes, entertainment etc. In the same way the government takes the country’s tax money and makes a budget each year. This budget shows how much money will be spent on different things and it changes from year to year. For example, during the coronavirus pandemic, the government had to spend more money on hospitals and healthcare.
In India the money earned is very unbalanced where 66% or 2 out of 3 people are so poor that they do not have enough money to buy basic items to live. In fact salaries are so low that only 1% of Indian citizens pay income tax which is the same as 1 in 100 people. This is because most people earn too little to pay income tax. The government helps these people by giving many things for free or for cheaper things like trains, buses, schools, hospitals and food grains and this is paid for by tax money. However this is only a small part of the big government budget. What happens to the rest of my tax money?
Most of the tax money is used to pay interest on government loans. If the government spends more money than it has in its budget, it needs to take a loan. These loans are taken from different places like the World Bank. The World Bank is a company owned by the United Nations in the US whose job is to give loans to countries to help countries grow. Because of that interest on the loans have to be paid. This is just like how we often pay monthly interest on home loans. Government loans however, are of much bigger value. India owes 600 billion dollars to places like the World Bank. What a huge difference!
The next highest government spending is on defense, where 10% of the tax money is spent on the military. This includes buying guns and also paying salaries of military workers. This spending is extremely important in keeping the country safe so we can live in peace.
So the next time you pay your tax, remember that you are paying for the services you use and it is very important for bettering our country. If you have any other questions like these, please put them in the comments and we will try to answer them.
Written by Zahaan Karmali
