Sunday, June 08, 2014

Abolising Taxes.. Arthakranti Proposal of an alternate Government revenue model

Today I received an whatsapp message about an organisation called Arthakranti Sansthan, which is proposing an alternate to the existing financial governance for the country. The message can be read at the end of this blog post.

Normally, I do not read long whatsapp forwarded message but this message had a line that attracted my attention. It said, "Scrap all 56 Taxes including income tax excluding import duty". 

From the day, I have become an entrepreneur, taxes have been a big hindrance to my business model in terms of maintaining accounts and paying taxes. The current tax structure is simply too complicated. I believe we should pay taxes and contribute to the overall growth and development of the country. However, it was an easy belief system till the day I worked in the corporate world of TDS, where tax is deducted by the company giving you absolutely no trouble in terms of paying your taxes rightfully.

After I have started my business, taxes have been my biggest hurdle. At one end, I simply can't forge and evade taxes. At the other end, paying tax rightfully is a complete pain in the ass. For instance, I have not met a single sales tax consultant who is willing to accept my proposal of paying sales tax rightfully every month. They all say, you should not worry about taxes till your business gets an annual revenue of over a crore. We will manage your taxes (by evading it and bribing the sales tax officials).

So a proposal of an alternative tax structure was a dream come true for me. I continued reading the Whatsapp message. It had a list of FIVE point of actions:
  1. Scrap all 56 Taxes including income tax excluding import duty.
  2. Recall and scrap high denomination currencies of 1000, 500 and 100 rupees.
  3. All high value transaction to be made only through banking system like cheque, DD, online and electronic.
  4. Fix limit of cash transaction and no taxing on cash transaction.
  5. For Govt. revenue collection, introduce single point tax system through banking system – Banking Transaction Tax (2% to 0.7%) on only Credit Amount. 
As a banker (a decade of banking experience), I would say that it is a great long term idea that can change how a country is run. It will be perhaps the first idea of governance that India has not borrowed from the West. Even our constitution is a borrowed cut and paste job!

From a consumer perspective, the head-ache of paying taxes and the guilt of not paying taxes will completely go away. Whatever money would come to the bank, 2% (or less than that) would be automatically taken out. The accounting hassle will lie with the bank and they have the talent to do the same.

The decision to scrap the higher denomination currencies is also a great idea to discourage cash transactions. It will increase card based transactions at shops and other business establishments. I would be saved of the hassle of going to the bank to deposit cash standing in a queue. I would be saved of the hassle of giving change back to the customers.

For the Government, there will be those fews banks to reconcile the revenue collection.

No taxing on cash transaction is also a boon for the poor. Although it sounds like a double edged sword benefitting the cunning businessmen and the capitalist as well, yet I would support any policy that will primarily help the poor in their day to day life.

One of the most corrupt departments in Assam is the Sales Tax Department. This new model will completely stop departmental corruption at the tax collection level. It will also stop other kinds of corruption which mainly survives on cash transactions. Without high denomination currencies, under-the-table cash transactions will be severely affected.

Having said all that, I have one point of discussion. I believe that all policies should aim for an egalitarian society for peace and prosperity. It should try to create greater or equal opportunities for the poor as well. As we know that India is corrupt, not because our rules and structures are weak, but because our conscience and dharma allows us to become selfish and corrupt, so it is pertinent that this new taxation model should not have loophole for the rich to become richer by evading taxes.

For instance, I am not doubting that banking penetration can be increased and every citizen will be part of the banking structure in the future. I am doubting our mentality to evade taxes and therefore will always carry on cash transactions avoiding taxes completely. Even if the Government put a limit on cash transaction (say Rs. 2000), will that stop the citizens to carry out cash transactions?

One thing is certain that it will help the small businesses who earn less than Rs. 2000 a day. We surely have a huge percentage of people living in that kind of earning per day across the country. The moot question however is whether it will stop economic polarity, the difference between the rich and the poor, the difference between the haves and the have nots.

Whatever said and done, a large scale national debate should start on this idea and quick actions should be taken by the Government.

WhatsApp Message:

Mr.Arun Bokil , one of the key member of Arthakranti Sansthan was given time to share to PM Modi before recent election. He was given 9min for sharing but Mr Modi heard him for 2 hrs.

“Arthakranti Sansthan” is an Economic Advisory body constituted by a group of Chartered Accountants and Engineers. Arthakranti Proposal is an effective and guaranteed solution of Black Money Generation, Price rise and Inflation, Corruption, Fiscal Deficit, Unemployment, Ransom, GDP and industrial growth, terrorism etc.

“Arthakranti Proposal has FIVE point of actions simultaneously.
  1. Scrap all 56 Taxes including income tax excluding import duty. 
  2. Recall and scrap high denomination currencies of 1000, 500 and 100 rupees. 
  3. All high value transaction to be made only through banking system like cheque, DD, online and electronic. 
  4. Fix limit of cash transaction and no taxing on cash transaction. 
  5. For Govt. revenue collection introduce single point tax system through banking system – Banking Transaction Tax (2% to 0.7%) on only Credit Amount 
Important Points to note:
  1. As on today total banking transaction is more than 2.7 lakh crores per day say more than 800 lakh crores annually.
  2. Less than 20% transaction is made through banking system as on today and more than 80% transaction made in cash only, which is not traceable.
  3. 78% of Indian population spend less than 20/- rupees daily why they need 1000/- rupee note. 
What will happen if All FIFTY SIX Taxes including income tax scrapped :
  1. Salaried people will bring home more money which will increase purchasing power of the family. 
  2. All commodities including Petrol, Diesel, FMCG will become cheaper by 35% to 52% .
  3. No question of Tax evasion so no black money generation.
  4. Business sector will get boosted. So self employment. 
What will happen if 1000/ 500/ 100 Rupees currency notes recalled and scrapped :
  1. Corruption through cash will stopped 100%.
  2. Black money will be either converted to white or will vanish as billions of 1000/500/100 currency notes hidden in bags without use will become simple pieces of papers.
  3. Unaccounted hidden huge cash is skyrocketing the prices of properties, land, houses, jewellery etc and hard earned money is loosing its value; this trend will stop immediately.
  4. Kidnapping and ransom, “Supari killing” will stop.
  5. Terrorism supported by cash transaction will stop.
  6. Cannot buy high value property in cash showing very less registry prices.
  7. Circulation of “Fake Currency” will stop because fake currency printing for less value notes will not be viable. 
What will happen when Banking Transaction Tax (2% to 0.7%) is implemented:
  1. As on today if BTT is implemented govt can fetch 800 x 2% = 16 lakh crore where as current taxing system is generating less than 14 lakh crore revenue.
  2. When 50% of total transaction will be covered by BTT sizing 2000 to 2500 lakh crores, Govt will need to fix BTT as low as 1% to 0.7% and this will boost again banking transaction many fold.
  3. No separate machinery like income tax department will be needed and tax amount will directly deposited in State/Central/District administration account immediately.
  4. As transaction tax amount will be very less, public will prefer it instead paying huge amount against directly/indirectly FIFTY SIX taxes.
  5. There will be no tax evasion and govt will get huge revenue for development and employment generation.
  6. For any special revenue for special projects, govt can slightly raise BTT say from 1% to 1.2% and this 0.2% increase will generate 4,00,000 crores additional fund!

1 comment:

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