An attempt to suggest “One Nation–One Tax” which would generate more than the present aggregate revenue collection in India
Fellow citizens—kindly spare few minutes to go the following cryptic note; if convinced promote this idea as you deem fit so that government comes out with tax reform on the lines suggested.
1. After the introduction of GST we have two revenue collection systems—Income Tax and GST.
2. It is time we decide to have either Direct Tax or Indirect Tax.
3. We earn Income for the services rendered to the Society. Income is an index of the contribution made to the society. Under the Income Tax “the more you contribute (and therefore earn more) the more you are required to pay as Tax.
4. Similarly, savings in the Banks increases household savings (national wealth) are available to the Society for productive purposes. Yet on the interest that accrues thereon are taxed.
5. Therefore, we urge that there should be NO TAX ON INCOME and SAVINGS—they are in the nature of National Wealth. (Also honest, law abiding and timid (कायर) persons—who abound in large numbers–like me get jitters (सिहर उठते हैं) and literally suffer health wise like High BP, fever, and the like—I am not exaggerating these).
6. Therefore, abolish INCOME TAX.
The other source of revenue generation is GST—new Avatar—an amalgamation of all Indirect Taxes which is claimed by our Finance Minister (who has enunciated the theory of “One Nation:One Tax (see the text below) as simplest possible tax.
7. If the reaction countless interests—especially small traders—is to be believed it is not simple as claimed by the honourable FM.
8. You have to maintain voluminous Invoices and other documents. One should necessarily not only own a computer but a wizard in its operation. The returns to be submitted are many and the periodicity of submitting returns to the Authorities are very frequent.
9. For compliance of the requirements one has to devote much of their time and effort in preparing and submitting the returns to the satisfaction of the Authorities—if it is not Inspector Raj then what it is.
10. We get attached to our possessions and would not easily part with them. It is human psyche. Income Tax expects us to part with our possession (Income) under the threat of punishment. State expects us to keep abreast with the ever changing complex rules of the Income Tax, maintain & submit details of our financial dealings to the authorities and pay tax to their satisfaction. The citizens tries to pay as less as possible while the State tries to extract as much as possible. In many a cases there is collusion between the tax payers and the all-powerful authorities.
11. Moreover, submission of life long tax returns intrudes into our privacy seriously.
12. It is therefore suggested that we do away with Income Tax and opt for only GST.
13. GST however has brought in many serious issues like preparing various documents at every stage, preserving them and submitting several reports and returns to the authorities. Possession and knowledge of computers have become a must to almost every businessman.
14. “Most of the problems in our lives are that ‘there are available simple solutions but it is our Brilliant Minds that complicate every simple solution” –
Following is an attempt to suggest simple but formidable solutions—whether it is so is for the common man, other interests and the law makers to decide. They are cryptic and meant only as an outline.
A. With the imaginative Schemes like Jan Dhan Yojana, credit of subsidies directly into the Bank Accounts of the beneficiaries, the number of Bank Accounts have swelled to 50 crores or so—almost everyone who matters have Bank Accounts.
B. This 50 crores plus Bank Account would serve as the “Tax Base” and therefore we can have a very reasonable rates of tax so that no one would find them burdensome and the temptation to avoid tax would be minimal.
C. In the Kautilya Shastra the great Chanakya had recommended that the tax rate should not exceed 5%. In the present scenario this limit can be raised to 10%.
D. It has been our experience that Tax Deducted at Source (TDS) is the most potent mode of tax recovery. It is reported that TDS represents more than 90% of tax collection.Online GST Certification Course by TaxGuru & MSME- Click here to Join
E. We are fortunate to have a very efficient and widespread Banking industry in our country. The tax collection would be bank-centric.
F. Encourage digital transaction by steps like free use of instruments like debit/credit, AePS, CTS,IMPS,NFS, RuPay ATM (with no restrictions as of now), etcetera.
The present revenue collection at the Centre as per 2017-18is around –
|Income Tax||441,255 crores|
|Service Tax||225,000 crores|
|Round it off to||1,200,000 crores|
|Add|| 50,000 crores
(assumed revenue collection of States/Local Self Governments)
|Aggregate||1,250,000 crores (Gross)|
The proposed Scheme should be able to net a minimum of 1,250,000 crores (NET) or more.
In spite of numerous attempts, we have not been able to get either from the RBI or the Finance Ministry in the Government of India approximate aggregate annual withdrawal of sums from the Banks.
Our guess is that sums withdrawn by individual (consumers) and business must be enormous. It is presumed that a flat TDS rate of 5% or thereabout should produce more than the present revenue collection indicated above. The actual rates of TDS starting from 1 or 2% going up to 10% for different slabs have to be worked out by a Committee of Experts keeping in view the revenue collection target.
Some additional points
(a) In order to achieve the avowed object of the Government to keep the cash transaction (1) the TDS on cash withdrawal may be somewhat higher; (2) ceiling on withdrawal of cash and retention-of-cash-in hand for individuals and trades should be prescribed (3) excess cash in hand should be deposited into the bank for which bank should work all the year round (in 2 shifts in major financial cities/towns) like other public utility services.
(b) Provide some meaningful incentive for making and receiving digital payments (the price to pay for this would be very insignificant).
(c) As for as possible keep the TDS rate less than the Bank interest so that majority of the persons do not feel the pinch of paying tax.
Exemption – Have no exemption. Let every single citizen pay as a duty towards the Society.
However, in cases of PM/CM Fund and similar specified Fund give 100% exemption.
Corporate Tax – The Corporate Tax is ultimately borne by the consumer. Also trade/business would deposit and withdraw moneys multiple times for running of the business. Ultimately the tax burden would fall on the actual consumers. Therefore, it is submitted that a uniform flat rate of 1 or 2% may be applied to the Corporates. It is however emphasised here that it should however be ensured that only direct production cost should be taken into account. Many of the Business Houses and even small businesses manage to show their personal expenses like on personal travel, visits etc. as business expense. Even expensive Guest House etc. are maintained as amenities. How far consumer should bear such indirect costs should be allowed as Business Cost is a moot point to be considered.
Charitable Institution/NGOs – Payments/contributions made to them should attract a uniform TDS of 1%. Similarly on their expenditure levy a uniform TDS of 1%. Have a stricter vigilance on them.
Staff rendered surplus in the existing Revenue Departments:
A large number of existing staff would be rendered surplus. Amongst others following steps are being suggested for their absorption.
(a) As suggested above introduce all the year round working for Banking Industry as in the case of other Public Utility Services.
(b) This would enable the public to deposit extra money in hand promptly into the Bank.
Vigilance – There would still be some elements who would like to circumvent the laws. To keep a strict watch on them form an elite force selected from the existing Revenue Departments. They would form a Special Cell in the NATGRID devoted to economic offences.
Transparency – While depositing money the “Source” and withdrawing money the “Purpose” should be required to be mentioned. This would serve as a trail of evidence, if needed.
State governments are very keen to retain their power of taxation. Therefore, let the law permit the States to apply the TDS rates mutatis mutandis in their respective jurisdiction. If sufficient tax revenues are shared with the States, they may not utilise this enabling provision.
Indirect tax – for items like petroleum products, tobacco products, narcotics & drugs, luxury items government can have a mini-indirect tax legislation, to control prices and regulate them.
Now is the time to quote what our present Finance Minister has said –
“If all tax payers pay their taxes, it will help bring in tax rates lower. 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 costs. You have to have one person being assessed once and not by different tax authorities in different ways”.
Very pious thought indeed. Let us hope in the coming Budget he lives up to the principles enunciated by him.
As per N.Ram “Regulatory misconduct is at the root of corruption.” – The Scheme suggested in this Paper recommends “Lesser Regulation—as the System would regulate Tax Collection with least human intervention.
This senior citizen has the honour of placing the above suggestions for the consideration of all. Those who agree may promote this idea with whatever improvement one deems fit. The ardent wish is that something emerges for the benefit of all. May be as in the case of “zero” we can set example to others as a pioneers!
Conclusion – I would like to call this method as direct-indirect taxation. The slogan is as you derive “Personal Benefit” by withdrawing money from for personal satisfaction; pay an insignificant percentage of it towards “General Benefit or Kalyan”. The tax may be called “Benefit Tax” or “Kalyan Tax” or “Kalyan Kar” meaning Kalyan Tax or Do Kalyan.
‘MAY ALMIGHTY GIVE US THE WISDOM TO DECIDE WHAT IS BEST FOR OUR GREAT COUNTRY – BHARAT
Brilliantly summed up by our current Finance Minister Arun Jaitley –
“If all tax payers pay their taxes, it will help bring in tax rates lower. India is politically integrate 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 costs. You have to have one person being assessed once and not by different tax authorities in different ways”.
Very pious thought indeed. Let us hope in the coming Budget he lives up to the principles enunciated by himself.