After Demonatisation Next Item Should be Tax Reform

Vishwanathan S

“One Nation one Tax Law”

OBJECTIVE

A System which would calculate, determine tax payable, and recover it automatically without any human intervention—e-governance.  No necessity of collating and submitting Tax Returns– Individuals would be free to carry on with their professions unhindered. There would be no interface with Tax Officials—the source of malpractice and corruption.

During the last Election PM Narendra Modi promised abolition of Income Tax. In his this Independence Day Speech he said “There is a class in the country, especially the middle class, the upper middle class, who is more troubled with income tax officials than the police. I have to change this situation, I am trying and I will change it.”

Reality – Not only Income Tax has not been abolished but like his predecessors the FM has made it more stringent by prescribing that failure to submit tax return within the date-line (whether one is unable to do so for reasons like calamity in the family, the individual being in coma/unable to move etc.; or it may be a case where there is refund of tax is involved). Even though everyone talks of end of Inspector Raj, almost every tax proposals have been strengthening Inspector Raj.

“India is politically integrated into one country, but economically we are different States. You have to have a uniform rate of taxation throughout the country. We need to have a moderate taxation to bring down the costs. You have to have one person being assessed once and not by different tax authorities in different ways” – ARUN JAITLEY

Reality – In the short span of less than three years not one but several additional taxes have been introduced. It is due to the ad hoc and piecemeal approach of the Government. Faced with an issue they invariably come out with cess/levy proposals. This has been the case irrespective of the party in power.

In the eyes of the Revenue Officials every single individual is a potential tax evader-no one is honest. But the Revenue Staff, who are selected and appointed from the same stock of dishonest people, are assumed to be honest and paragon of virtue. As if it is not enough – Unlike others, Income Tax authority is the only government agency that can launch an investigation, make an accusation, render a verdict, and impose a punishment—without ANY oversight or checks and balances. They are cop, prosecutor, judge, jury and executioner rolled-up into one! They are clothed with enormous discretionary power. They can accuse anyone without assigning any reason; it is for the accused to prove his innocence to the very official who is accusing.

WHEREASE even the worst criminals (including non-citizens) have the right to keep mum under the Constitution. It is for the Prosecution to prove the guilt to the satisfaction of the judiciary. Tax evasion is at best is a Civil Offence. But this Constitutional right is denied to the Citizens. It is for the accused to prove his innocence to the satisfaction of the accuser viz. the Revenue Official. Can anybody say why it is so?  Why denial of Constitution right  has not been raised raised all these years???

Dear Fellow Citizens please consider the following, think and decide for yourself.

1. The Nation rightfully expects its citizens to CONTRIBUTEto the National Wealth by way of producing goods/services; for which he receives INCOME.

2. It is however a paradox that the more you CONTRIBUTE(and earn Income therefor) the more you are required to pay as Tax. Less you CONTRIBUTE less you pay Tax. It is akin to a student getting lower grades for having well in the examination.

3. Every country wants to encourage maximum HOME SAVINGS so that greatest possible funds are available to the Society for productive purposes. However, presently Savings/Depositsand interest accruedthereon is subject to tax—though HOME SAVINGS are a CONTRIBUTION to the Society.

4. By nature, man tends to accumulate and gets attached easily attached to his possession and would not easily part with it. It is human psyche. Yet, the Income Tax expects that he voluntarily compiles, calculates tax payable, pay it promptly and submit the details to the satisfaction of Tax Authorities within the time limit or face fine and punishment. No less a person than Einstein had observed “Income Tax rules are most difficult to understand and comply”.

The result is that there is a constant struggle between the Citizens and the Authority. Former wants to pay as less as possible and the later wants to recover as much it can. Both are left unsatisfied.

It is therefore strongly urged that please do not tax CONTRIBUTION – as reflected by the INCOME but encourage the citizen to contribute as much as one wishes or can so that National Wealth is augmented to the optiimum.

Similarly, SAVINGS in the Banks and INTEREST accrued thereon, so long as they are not withdrawn, are in the nature of CONTRIBUTION as they are available to the Society for productive purposes, again and again from the Banks.

Therefore DEPOSITS in the Banks till withdrawn too should not be subjected to any tax.

Question arises ‘how then to raise revenue—the life line of the Nation!!! The answer is very simple and easy to administer.

Tax the BENEFITS. We derive benefit of goods/services desired by us; primarily by withdrawing money from the Banks. With the advent of demonetisation, Jan Dhan Yojana, credit of subsidies directly into the Banks etc. almost entire money of the people have come into the Banking.

Under the present dispensation there is an unintended benefit. For example, I earn Rs.10 lakhs by putting in labour. It is subjected to Income Tax. I raise a loan of Rs. 1.5 crores from the Banks for the purchase of immovable property and I start getting benefit of living in the posh flat/bungalow. It is a huge benefit—but I do not have to pay any tax on this sum simply because it is called “LOAN. As if it is not enough, I get rebate on the interest payable on this “LOAN” for many more years.

The proposed Scheme – One Nation – One Tax

The total number of Bank Accounts is reported to be around 40 crores. As against the present 4 crore individuals who submit Income Tax Returns, 40 crore Bank Accounts can serve as the Tax Base.

Our country is lucky to have a very efficient digitised Banking and Post Offices with their presence in the nook and corners of our vast country. If need be they can be established where there is no presence of theirs. Now almost every individual has cell phone/smartphone. Given the wish, the present Government under the leadership of Narendra Modi can give a push to this. Kindly go through the following suggestion. Feel free to improve upon them. If there are any contrary views write to me at sviss38@yahoo.com. After all like everyone I too must be having a tunnel vision. I would like to be educated. Those in general agreement with the thoughts expressed here, may please bring it to the notice of their friends with a request that they submit the suggestion (with whatever improvement you can think of) to the notice of all political parties with the rider that whichever party promises to bring a legislation on the lines suggested will have their votes in the ensuing General Election. Thanks in anticipation for the cooperation.

The suggestion/idea in brief

2017-18 Budget Targets

Income Tax – 441,255 crores

Excise – 406,900 crores

Service Tax – 225,000 crores

Total -1,073,155 crores (Round it off to 1,200,000 crores

Under the Scheme being suggested we should be able to recover a minimum of 12 lakh crores revenue; without any human inter-action or paper work—e-governance wherein the SYSTEM would determine tax payable and recover it automatically.

Our country is blessed with a very efficient digitised Banking/Post Office network throughout the country. We have 40 crores Bank Accounts. As against the present 4 crores Direct Tax payees, we will have 40 crores Bank Accounts as TAX BASE.

With measures like demonetisation, Jan Dhan Yojana, subsidies to be credited directly into the Bank Accounts, almost entire money which were outside the Banking have come into the Banking.

To the exclusion of Income/Corporate Tax all other (indirect) taxes are based on Expenditure (mostly met by withdrawals of money from the Bank. Presently, 90% of the Direct Taxes are collected by way of TDS. It is therefore suggested that in keeping with the slogan “One Nation – One Tax” enunciated by the present Government, we will have only one Tax Collection System based 100% TDS against withdrawals (roughly speaking BENEFITS obtained by the individuals/Business) from the Banks.

Let the experts and others in the field determine a TDS levy starting from as low as 1% going up to 25/30% where the annual withdrawal is 1 crore or more so that we are able to raise  revenue of 15/20 lakh crore plus.

To discourage or keep cash transactions under check, prescribe a higher TDS on cash withdrawals. Also the recipients of non-cash payments can be considered for a pay back on the amounts so received.

Let every individual pay taxes. Even presently every single individual is paying indirect taxes. Really rich incurring benefit of rupees crore and above (availing personal benefit by way of withdrawal) should pay high TDS.  Suppose I have a Bank Deposit of say 100 crores and I spend 2 crores I would be paying Taxes at the prescribed TDS rates. The balance with accrued interest thereon is available to the Society through the Banks for productive purposes—hence would not attract any tax till withdrawn for PERSONAL BENEFIT.

The enormous revenue generated could be automatically shared at the stage of TDS itself amongst the Centre, State and Local Self Governments on an agreed formulate to be recommended and reviewed from time to time by the NITI Ayog or the Finance Commission.

The State Governments would not be willing to be deprived of their right to raise revenue in their respective jurisdiction. ENABLE THEM TO LEVY A TDS ON SIMILAR LINES IN THEIR JURISDICTION.   

Some of the steps to be taken to make this Scheme a success: (There may be many more)

1. Upgrade the services of the Banks and make its services totally free to the customers. No restriction on facilities like ‘ceiling on ATM withdrawals; signature verification,  issue of cheques and the like.

2. In order to restrict cash transactions which give rise to cross border terrorism and other mal-practices – a higher TDS can be thought of.  A ceiling on cash withdrawals and cash-held-in hand can also be prescribed. The excess money in hand is to be promptly deposited into the Bank. Failing which entire money should be subject to seizure and confiscation.

3. In order to enable people to deposit the excess money into the Bank promptly, as in the case of Public Utility Services like communication, transport etc. introduce 365 working days with 2 shifts for the Banks. This would also enable Government to absorb surplus staff (if any) in the Revenue Departments and also generate higher employment.

4. Some of the elite from the Revenue Department can be drafted to act as “watch dog” against corruption, undue price rise.

5. As suggested by Pune Arthakranti, the highest denomination in circulation should be Rs.500.

6. All Utility Bills like Telephone, Water and Electricity charges to be made payable by bank instruments/plastic money.

7. Use of payments/receipts by plastic money should be incentivised by offering them some pay back.

8. Since many of us have more than one bank account, all the bank accounts of an individual should be collectively identified / seeded by Aadhaar number.

The enormous revenue generated could be automatically shared at the stage of TDS itself amongst the Centre, State and Local Self Governments on an agreed formulate to be recommended and reviewed from time to time by the NITI Ayog or the Finance Commission.

CORPORATE TAX

In the case of business however since there are multiple deposits and withdrawals a uniform TDS of 1% (a higher TDS  in cash of withdrawals) can be applied. It should be ensured that the benefit accruing due to this is passed on to the consumers.

CHARITABLE INSTITUTIONS

Contribution made to the Charitable Institutions contributions should be taxed by a uniform rate of 1%. The Charitable in turn may be charged TDS of 3 or 4 percent when they withdraw sum. Since payments made by the Charitable Institution(s) is targeted towards a particular segment of the Society, it can be logical to share a percentage of sum so spent by way of TDS for the Society at large.

Transparency – As in some countries while depositing money the “source” may be required to be mentioned. Similarly in the case of withdrawals the purpose for withdrawal of amount may be stated like ‘rent’ ‘return of loan’ ‘loan’ etc.

Counter point of view–Most of my friends immediately have come with a rejoinder/counter saying that many people would still opt to keep their money outside Banking. This apprehension is without much basis.  Assume that one has 5 or more crores in cash. He would not need the money overnight. If he chooses to put the money into the Bank(s) he would start earning interest up to 8-9% per annum.  As and when he withdraws money, he would be required to pay graded TDS starting from as little as 0.1%. Therefore, the chances of any one hoarding the money in cash–with the added risk like being robbed—seems to be a remote possibility.

Vigilance – Any legislation however reasonable it may be, there would still be some dishonest and unscrupulous people who would try to circumvent the provisions.  In order to curb such a possibility, it is suggested that in the NATGRID (Thanks to the UPA Government for having conceived it) create a UNIT to be staffed by specialists drawn from the present Revenue Departments and other Specialists. It would be their job to maintain round-the-clock vigil to detect any infringement or mal practice on the part of people.

Exemption – There should be no exemption whatever. Let everyone pay tax on the money spent. The only exception could be contribution to Prime Minister/Chief Minister and Special Fund drive that may be announced by the Governments.

GENERAL

(a) This way, we would have achieved the wish of the Finance Ministers that “We need a Tax System which Generate Revenue on a sustained basis without use of Tax Collection methods at the end of each year to meet the targets.”

(b) Whenever the Finance Minister requires rising more revenues for meeting contingencies like famine, drought, natural calamity, war etcetera what one has to do is to tweak the TDS slightly for a given period.

(c) RBI is also keen to monitor all banking transactions; the idea being introduction of a system which would ensure ‘an automated data from the IT Systems of Banks for the RBI/Governments with no manual intervention to know the position. It will enhance the quality and timeliness of data for formulation of policy.

(d) Incentive to the Banks which would be the hub for collection of revenue – Incentive/reward to the Banks for its vital role of collection of government revenues, banking industry as such can be completely exempted from paying any tax to the government. Banks can retain the entire profit with themselves. And/or banks can be given a percentage of TDS collected by them. In return they should offer their services like signature verification, bank drafts, transfer of money, issue of cheque books, withdrawal of money from ATM and the like totally free.

There can still be a necessity to regulate some aspects in the economy e.g. Tobacco, Narcotics, consumption of petroleum products and the like.  Central and State Governments will have the power to regulate such activities by taking recourse to present indirect tax provisions like Central/State Excise.

Special provision for public transport like bus, taxi, three wheelers (hereafter referred to as public utility services (PUS)

It would be difficult for any government to create a huge enormous direct employment as such. They can no doubt create an environment which would encourage self-employment – transport could be one area.

PUS could be made available vehicles (including hybrid ones) at subsidised rate. On the recommendation of the Expert Committee, PUS can be made available fuel up to the recommended level at cheaper rate. For example the taxi/three wheelers can be afforded up to 500 litres every calendar month at cheaper rate. Simultaneously, reduce the tariff so that transport tariff is reduced considerably such that even private vehicle owners would prefer to use PUS to a great extent. Toll rates for PUS could also be reduced. Even if some PUS owners sell their quota at higher prices to others should not be of great concern. Such measures can generate more and more affordable PUS and increased employment.

One can go on and on in this vein. There is a danger that we would be lost in verbosity. Hence we are stopping here.

TO SUM UP

1. Man by nature tries to accumulate possession and would not voluntarily part with it. Hence to expect him to submit honestly one’s financial details, compute and honestly pay Tax under the present Income Rule seems to be impossibility.

2. As you derive PERSONAL BENEFIT by withdrawing money – pay a percentage of it by way of TDS for the GENERAL BENEFIT. Since Taxation would be based on BENEFIT कल्याण, the tax may perhaps be called कल्याण कर(कर means Tax and also do good).

3. A System whereby the State computes and determines by its citizens and its recovery automatically 100% by TDS (with no human intervention) seems to be the only simple but effective means for raising revenue.

4. There would be no need for GST etcetera under negotiation with the State Governments.

5. To deal with special items like Tobacco, Narcotics, Petroleum products etcetera we can have indirect tax laws as at present.

6. ADVANTAGES are too many to be adequately expressed. They are best left to the imagination of the people.

We would like to conclude with the following quote:

“Lower tax rates will help curb generation of illicit funds (black money). We need to focus on how to stop this practice of parking money outside the country – RBI Governor Raghuram Rajan.

Hope we have been able to make ourselves understood. We are taking the liberty of placing the above thoughts before the fellow-citizens for a nationwide discussion so that some concrete and meaningful Scheme emerges and implemented. With folded hands we request that please share this with your relatives, friends and the rule makers. Thanks and regards.

APPEAL TO THE FELLOW CITIZENS

Kindly go through the above suggestions with an open mind.  Hope I have been able to make myself understood. If convinced, please make an appeal to the PMO, Finance Minister and others in the State Governments to consider the above suggestion dispassionately and come out with a simplified Tax Regime.  Everyone is at liberty to improve upon the presentation. Government is bound to listen to the voices of जनता जनार्दन.

A similar ardent appeal to the PMO, Finance Ministry and others—please go through the above suggestion with an open mind and take whatever action you deem fit in the larger interest of the country.

जय हिन्द – JAI HIND

“शुभमस्तु”

sviss38@yahoo.com

TAX REFORM

NOTE – As a sequel we can think of a “Universal Cashless Healthcare-cum-Social Security” on the following lines.

Medicare-cum-Social Security

“What makes for a good healthcare system is universal and adequate access without excessive burden.  There is one possible solution for providing such coverage”

The poor must be protected: others must bear their fair share of the burden

Following is a humble attempt to suggest a scheme whereby every single citizen of our great country gets the coverage of health-CUM-death insurance and Pension, with least hassles.

Some basic assumptions

Any major scheme such as “Universal access to healthcare” should necessarily be a joint   public-private venture.

a) The implementing agencies would be responsible to the governments for the successful execution of the programme.

b) Even the most illiterate/ignorant citizen should be able to avail of the health/insurance scheme easily.  All that one has to do is to flash his/her Identification Card in any of the recognized hospitals/institutions/authorized OR medical attendants of ones choice in any part of the country to avail of the benefit.  The citizen would not be required to pay single paise to any one for the medical services.

c) In case of any grievance watch dog personnel with adequate powers should be available everywhere so that they would come to the spot and resolve the problems/inadequacies, if any, on the spot.

d) Also visitors to this country should be able to avail of medical facilities against a prescribed fee on arrival.  This will be in keeping with our motto अतिथिदेवो भव.

We have attempted to make suggestion as simple as possible.  No doubt it would need further improvements at the hands of experts.

Without going into the inadequacies and inequalities of the existing Social Security Legislations, a highly simplified Social Security Scheme is being suggested which would cover each and every citizen of this country.  As reported in a Mumbai Based prominent Newspaper one of the CEOs of a prominent Insurance Company had said, “It would be impossible to give insurance coverage beyond the age of 75”.  In the proposed legislation it would be possible to give insurance coverage even to centurions.

Fund requirement: Indian population is around 125 crores.  Assuming that we need an annual premium of Rs.2000 per citizen, we would need Rs.2.5 lakh crores per annum.  We may err on the safer side and assume the fund requirement as Rs.4 lakh crores per annum.

Since we have the advantage of the numbers it is assumed a premium of Rs.2000 per head per annum should be adequate to meet the cost of treatment-cum-insurance.

How to raise fund

This has been dealt with in the main Paper. That is a percentage of TDS against withdrawals from Bank would be the primary source.  There are very many social minded individuals in this country.  They should be encouraged to make their contribution. The entire amount contributed by the individuals/institutions/business should be completely exempted from any tax. In addition the State/Central Governments can allocate some fund from the Budget. This way we can have more than sufficient fund available for the running of this Scheme.

Scheme in brief

a) An authority would be established known as “Samaaj Suraksha Adhikari/Social Security Authority” – SSAfor short. He would be supervised by Board of Governors.

b) SSAwould recognize periodically series of Hospitals like Government/Cantonment/Municipal Hospitals/ESI/Government Employees Health Schemes and private hospitals like Bombay Hospital, Apollo Hospitals, Jaslok, and similar institutions for medical treatment/hospitalization.

c) Similarly, he would recognize Authorized Medical Attendants (AMA) and CHEMISTS all over the country.

d) SSA would prescribe a realistic and uniform rates—to be reviewed periodically –

a. Hospital charges and services like x-ray, MRI, blood test;

b. Fees for the services of the AMA; and

c. Prices of items to be supplied by the Chemists.

e) Beneficiaries needing the services would present themselves before the recognized Hospital of one’s choice for treatment.  Aadhaar card/Driving Licence/Voter ED etc would serve as the ID.

f) The beneficiary would be treated as a paying-patient but would not be required to pay single paise for one’s treatment.  All the costs would be borne initially by the Hospitals/Institutions themselves. They would periodically claim reimbursement from the SSA. As paying patients they would be entitled to a (decent) Paying Ward. Those desirous of treatment in Special Wards should be required to pay the entire charges from their own pockets.

g) In the case of disablement or death a very liberal compensation/pensioncan be given to the victims or nominees. It should be around 5 or 10 lakhs and Pension should be around Rs.10000 p.m. to be paid through Banks or Post Offices.

h) Similarly Authorized Medical Attendants (AMA) would be recognized, rates for various services would have been prescribed by SSA.  They would not charge the patients. They would also get reimbursement from SSA periodically.

i) For supply of medicines prescribed by the AMAs Chemists/Druggists/Pharmacy would similarly be recognized by the SSA – who in turn will get reimbursement from SSA against medicine (at the approved rate) supplied.

j) Watch dogs to be appointed at different strategic locations, who would keep a watch by visits to Hospitals etc. so that possible misuse of the Scheme is kept to the minimum. Also they should be available on call 24×7 to the citizens so that they can come personally to the spot and remedy the situation when contacted by the concerned citizen (beneficiary) by phone/mobile/in person.

k) Thus all the citizens would be entitled to benefits as befitting a contributor. Those who want specialized treatment, as stated above would be required to bear the entire expenditure themselves.

l) There should be a feedback system so that the SSA receives information about the quality of services rendered by the Institutions and AMAs.

Rural areas – It would be a stupendous task to encourage doctors to move to villages/hamlets. Natural healing methods like Ayurveda, Unani, Siddha, Touch Therapies (like acupuncture, acupressure, yoga and the like) could be popularized there—which may be easy to learn and practice.

We can take help of tele-medicine and distance healing. Where immediate treatments in well-equipped hospitals are needed, we can have an efficient and reliable DRONE SERVICES. The patients can be brought physically with the help of all-weather Drones without loss of time.   No doubt we would need a huge fund and induction of latest technology.

ANY SCHEME HOWEVER METICULOUSLY DRAWN IS BOUND TO BE MISUSED BY A MICROSCOPIC PERCENTAGE OF BENEFICIARIES.  APPREHENSION OF MISUSE SHOULD NOT BE A GROUND FOR OUTRIGHT REJECTION OF THE PROPOSAL! WHILE ALLOWING FOR THIS LEAKAGE, WE SHOULD TRY TO CURB THIS   MENACE TO THE EXTENT POSSIBLE BY APPOINTING WATCHDOG TEAMS/FLYING SQUADS CONSISTING OF SOCIAL WORKERS ARMED WITH WIDE POWERS, SOME OF WHOM IN TURN CAN ALSO BE DISHONEST TO SOME EXTENT.  Let us not shelve this idea on the ground that the Scheme is likely to be misused. Even if there be say 10-15% misuse the remaining 85-90% would stand to gain immensely.

In order to reach the rural and neglected areas the SSA can think of giving incentives by way of reimbursement at somewhat higher rates. The doctors opting for posting at such places can also be given some meaningful attractive incentives.  It will also be a good idea that SSA ascertains from the patients/beneficiaries the quality of services rendered by the recognized institutions/hospitals.  The subject is so wide and complex that one can go on giving more and more suggestions – but it would still be inadequate.  Let us embark on this Sacred Project. As we get going, we can further improve and fine tune the system.

These are details to be worked out in more precise terms.

It is only a cryptic suggestion for the consideration of well-wishers, social workers and legislators to consider the proposal and to come out with a viable but simplified legislation.  Various checks and balances will also have to be formulated so that there is least fraud.  But we should not shelve the project.

To sum up

1. We have a central authority in place known as Samaj Suraksha Authority with a Board of Governors/Trustees.

2. Banks collect by way of TDS against withdrawals and place the amount of around Rs.4 lakh crores at the disposal of the SSA.

3. It is funded by the consumers.  The more you consume, more you pay and less you consume, you pay less.  However, the benefit is same and uniform for all.

4. Governments, Individuals, Corporates and philanthropists can augment the Fund. Such donors should be exempted automatically 100% on such donations.

5. SSA recognizes Hospitals/Institutions/AMAs/Chemists. They get reimbursement from SSA.

6. A common tariff laid for the entire country and reviewed periodically.

7. Citizens avail of these cashless services at the place of their choice.

8. Powerful Watchdogs/Flying Squads are there to oversee the function.

9. For Rural Areas special extra incentives are given so that greater numbers of institutions/hospitals/AMAs are encouraged to move to rural areas.

10. Foreign visitors can be extended this benefit against a Flat Premium payable on their arrival.

Lastly, once the Scheme is implemented, it is continuously monitored and improvements introduced from time to time.

Further course of action – The suggestion of one Shri Nishikant Dubey’s suggestion of minimum pension of 5000 rupees can also be taken care under the above scheme.  Taking into consideration the cost of Healthcare, Insurance on the death/disability and a pension of around 5000 after retirement (60 years) and a suitable TDS deduction against BANK WITHDRAWALS which would not exceed 2% could be decided upon.

Note—you can tag it on with other Schemes like Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana already under consideration/force. If need be the individual may be required to contribute a token sum of say Rs.12 p.m. or Rs.120 p.a. 

May our country prosper!!!

Let Almighty show us the best way!!!

Note—you can tag it on this with other Schemes like Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana already under consideration/force. If need be the individual may be required to contribute a token sum of say Rs.12 p.m. or Rs.120 p.a. 

Every citizen is free to improve upon the above thought and carry it forward. Thanks – Jai Hind.