Tip & Cess Pool

Businesses and governments like extra charges. But surprise charges are not good for customers or citizens

People should live within their means. Governments should do the same. Every year, the Centre and state governments make a Budget. They decide how much money they will collect and how much they will spend.

But what is the point of a Budget if governments later say they need more money and add a “cess”? Himachal Pradesh has just added a 60-paise-per-litre cess on petrol and diesel. The amount is small, and the reason may sound good. But the idea is not good.

A cess is like a government saying, “We need money for this, so you pay extra.” Having a drink? Pay a little more for health services. Driving a car? Pay extra for planting trees. It can make citizens feel like the government has a “tip jar” that it can put out whenever it wants.

Businesses have their own tip jars. We understand “bakhsheesh”, but most people would rather know the full price before buying something. Yet restaurants and cab apps have made tipping more common. Some cab apps even let you promise a tip while booking. In some cases, you may find it harder to get a cab unless you agree to tip the driver.

That is not fair. The good news is that the road transport ministry has told cab companies to stop asking for tips before the ride.

Tipping also has an uncomfortable history. It grew out of systems where some people were treated as more important than others. Today, there is another problem. If restaurants expect customers to tip workers, employers may feel less pressure to pay their staff properly. The workers’ income and welfare then depend partly on the customers.

There is also a problem with cab tips. The cab company knows more than the customer does. If you have already waited five minutes for a cab, you may feel you have no choice but to offer a tip. This is not really a free choice.

Government cesses are even more worrying. The government is often the only organisation providing a particular service, so citizens have little choice but to pay. And sometimes the money collected does not even get used for the purpose for which it was collected.

The CAG has found that about ₹3.7 lakh crore collected through different cesses was not transferred to the funds meant to receive it. Delhi, for example, has used less than half of the ₹1,624 crore collected through its Environment Compensation Charge. And around ₹48,000 crore collected for the welfare of construction workers was still unspent.

The Centre also introduced a 4% health and education cess on income tax in 2018. But health’s share of total government spending actually went down instead of up.

Tips and cesses may look like small extra payments. But they can become unfair when people have little choice about paying them or when the money is not used properly.

Businesses should pay their workers fairly. Governments should plan their spending properly. Neither should keep reaching into our pockets for extra money.

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