Taxes are the main source of income for government so government levy many types of taxes on its people to provide public utilities. Any shortfall and the government may run into "Cash deficit". Hence, the goal of any government is to have a such type of Tax Structure that can meet its social spending requirement and functioning of the government itself.
India has a very complex tax structure with total number of taxes amounting to sixty. The tax revenues roughly stand at Rs 14 trillion. However, due to tax evasion and higher subsidy burden, the government runs a fiscal deficit. Also, a complex tax structure with higher number of taxes creates loopholes for evasion which are exploited by many and cause toruble to tax payers in the hands of government employee. Thus, there is a strong need to revamp the tax structure of the country which has only given wide spread corruption that countrymen are weeping while politicians and government employee are minting money more-more than their real income by corruption and evasion of tax.
In a radical proposal, one research group, named Arthkranti Pratisthan has suggested to all political parties that all direct and indirect taxes should be abolished. Instead, there should be a single 'Banking Transaction Tax(BTT)' on both individuals and corporates. If levied at 2%, it can increase the tax revenues of the government to Rs 40 trillion! But this is anticipation not accurate figure. This should be only restricted to trade transaction not all types of financial transaction.
But to introduce BTT, country will have to withdraw 90% of currency note in circulation to make it necessary to transact business either through cheques or debit/credit cards, and withdrawls through ATM or banks will have to be restricted up to 5000/- only, and further this petty amount has to be made TAX FREE, so that poor people income does not fall further.
This BTT may reduce corruption and trouble originated in the government tax department but to waive the 'income tax' would be to bail out all those corrupt who had made trillion of rupee in illegal mining, real estate and encroachment of land during 10years of draconian Congress rule.
So income Tax should not be abolished. rather, employees under this department must be given task to raid the owners of corporates, business establishment, industries, and traders who have created black money through illegal means and with tax evasion so that country could become rich, and we could remove poverty and provide them shelters.
To make India Corruption Free, there is need to add the same clause which have been introduced in the 'Lok Pal Bill' for corrupt employees-to forfeit 'all immovable and movable properties of corrupt employee' when he is arrested red handed while accepting bribe. This captioned clause must be cut-copied and pasted in Income Tax law to apply when any businessmen declares black money after IT raids on individuals and his establishment.
If BTT implemented, India will have a single tax rate on both individuals and corporates. This will greatly simplify the taxation structure. It shall reduce paperwork related to taxation. Instances of tax evasion will also reduce to a large extent. Revenue of the India government will increase manifold without incurring any penny and it will be able to spend more on creating infrastructure and removing poverty and inequility in distribution of income.
At the same time, disposable income in the hands of an average Indian may increase which shall boost spending. All in all, the proposal has all the populist and fiscal ingredients in it which may briong down the price considerably after the removal of black money.
Hence, the main opposition party(BJP) is meditating to bring Tax structure reform because both the capitalism and socialism have failed in India to deliver the desired result and remove the poverty in 65 years despite distribution of trillion and truillion rupees under subsidy head..
Currently, it has undertaken a feasibility study on the matter. Though it appears that new tax proposal may indeed benefit the society and simplify the tax structure,
It is also anticipated that the banking transaction tax may also increase or increase the end price of essential goods. Since corporations make payments, right from procurement to sale of the product, via banking channels, they shall be liable to taxes at multiple points. This burden will be eventually passed to the consumers.
***Please send your comments to my Email ID: rajindarvij@gmail.com to collaborate and corroborate your thoughts too.
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"Democracy means- A government of the people, by the vote of the people, by the money of the people, and for the welfare of the people". Thanks
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