Dear Fellow Citizens,
I would like to share my thoughts about Revenue Collection. I seek your indulgence. Kindly go through them and decide.
As citizens we give our services to the Society and thereby CONTRIBUTE to the National Wealth. In return we get INCOME therefore. INCOME is therefore an index of our CONTRIBUTION made to the country. It is a paradox that under the Income Tax Laws, State seeks to tax us for the CONTRIBUTION made—the more you CONTRIBUTE, the more you are taxed.
Our Income Tax Laws are bound to fail on the following counts.
- We are possessive by nature. Once anything comes into our hands (even if we were to find unexpectedly something on the way side) we get attached to it and would not easily part with it. Income Tax expect us, under the threat of punishment, to part with our hard earned income as much as 30 per cent plus.
- Income Tax authorities expect us to maintain, collate and submit details of our finances to the Tax Authorities within the stipulated time or face penalty even if there is no tax evasion.
- Above all, every citizen is expected to keep oneself abreast with the ever changing complex Rules. Einstein had remarked the Income Tax laws are most difficult to understand, comprehend and comply.
- It assumes that every tax payer is dishonest, But feels that the Income Tax officials—who come from the same stock of dishonest Society—to be most honest. The reality is known to all.
- This band of honest officials is clothed with enormous discretionary powers. It is for the tax payers to prove to the same authority that the assumptions made by it are not correct.
- It is the only 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.
During the election campaign Prime Minister Modi had promised reform in the Income Tax Laws bordering on abolition of Income Tax and ending Inspector Raj.
The Finance Minister talked eloquently about “ONE NATION: ONE TAXATION”.
However, the reality is known to everyone. Inspector Raj is being stringed periodically. See the budget presented by our current Finance Minister.
Presently we pay tax on our INCOME as also on our EXPENDITURE (CONSUMPTION). It is time that we decide to have either Income Tax or Expenditure Tax differently called as —Central/State Excise Duty, Sales Tax, VAT, Service Tax, Swatch Bharat / Education Cess on and on. In fact no individual Official would be able to name all the levies at one go.
In keeping with the ONE NATION:ONE TAX slogan propounded by our present Finance Minister, I would recommend to the nation one all-inclusive highly simplified tax based on CONSUMPTION/EXPENDITURE which would produce greater net revenue with practically no human intervention. It is the interface between the tax authorities and tax payers that give rise to various mal-practices and corruption.
Now straight on to the Scheme
With the introduction of Schemes like Jan Dhan Yojana, Direct-Transfer-of Cash Subsidy and Demonetisation almost all the money have come into the Banking. Now is the opportune time to try reform in Tax collection.
Most of us withdraw money from the Banks to meet our PERSONAL (NEEDS) BENEFITS.
Tax Deducted at Source (TDS) has been the most effective and fool-proof method of tax collection. Hence introduce TDS as the one and only mode of Tax Collection.
The total number of Bank Accounts is reported to be around 45 crores—it would serve as a huge TAX BASE. The annual withdrawal of money from the Banks (PERSONAL BENEFIT derived by individual/s) would be enormous.
It is surmised that 5% flat TDS should give a yield of more than the present tax revenue of around 20 lakh crore. Team of Experts can work out a rising TDS starting from as low as 1% to 25-30% where withdrawal (expenditure/consumption/personal benefit) exceeds say rupees one crore.
The slogan is as you derive PERSONAL BENEFIT by withdrawing money from the Banks—pay a percentage of it as tax for GENERAL BENEFIT or KALYAN KAR (meaning Kalyan Tax or Do Kalyan). The levy may be appropriately called “BENEFIT TAX” or “KALYAN KAR (or TAX).
Some of the steps that may have to be taken for the successful implementation of the Scheme being suggested are—
- To restrict cash transactions in the case of cash withdrawals the TDS should be 1%.
- To encourage non-cash transaction (a) non-cash transaction should be totally free; (b) the non-cash recipients should be given a discount/rebate/pay back (if needed by on a graded scale).
- Almost all the Bank charges should be abolished. As the tax-collection would be bank-centric government can offer to the Banks, 2 to 5% of the revenue collection as collection charges.
- Suitable ceilings may be prescribed for cash withdrawals by the individuals/trade as also for cash-retained-in-hand. The excess money in hand should be promptly deposited into the Bank.
- For prompt deposit of the excess cash in hand, introduce 365 working days in two shifts. This would enable the surplus staff in the revenue departments to be absorbed.
- The remaining surplus staff in the revenue departments can be an elite force in the Revenue Intelligence Department.
- OR they can form a Unit in the NETGRID (conceived by the earlier government—how far it is operational is not known.
- India is a vast country with so many who are adept in violating the laws—the elite force referred to above would act as a deterrent to detect/eliminate such bad practices.
Transparency – While depositing money the ‘SOURCE’ should be required to be mentioned. Similarly while withdrawing sums the ‘PURPOSE’ should be required to be mentioned.
This would also establish a trail in case some investigation is required to be done.
EXEMPTION – Exemptions should be in a very few cases.
- All contributions to Government Schemes like Prime Minister Fund; Chief Minister Fund and other schemes brought out by governments.
- Presently payments made to Charitable Institutions are entitled in most cases are entitled to only 50% exemption. For example if I donate Rs.2 lakhs to Society for Prevention of Cruelty to Animals—I have parted with Rs.2 lakhs. I am required to pay tax @ 30% plus on Rs.2 lakh which is not justifiable. In fact I stand to lose 2,30,000. Instead I suggest that give 100% exemption. As and when the Charitable Institution spends contributions received by it, would be paying tax on the outgo by way of TDS. Here it is felt that the TDS could be flat 1 or 2%. This would give a fillip to the NGO. To regulate this on the lines of PAN all such organisations can be allotted CIN (Charitable Institution Number). Thus if I make a contribution to an institution bearing CIN, the bank would not cut TDS. The Charitable Institution would be paying 1 or 2% flat TDS as and when they utilise the amount by way of withdrawal.
- In the case of business the TDS could be a flat 1 or 2%. After all the ultimate burden falls on the individual consumers. Care should however be taken that business show only direct cost. There is a general tendency for the business to show their personal expenses as that of the business.
- Same individual(s) run different business and enjoy tax benefits. In our own area there is one business man has half a dozen Cycle Shops on the same street and enjoys tax concession for each one of them. This should be curbed.
- IN THE CASE OF ITEMS LIKE TOBACCO, NARCOTICS, LUXURY ITEMS, PETROLEUM PRODUCTS AND THE LIKE THEIR PRICES MAY BE REGULATED AS UNDER THE INDIRECT TAX PROVISIONS.
A small digression—To encourage public transport, in the case private vehicles and public vehicles duel pricing can be adopted. Public vehicles may be made available at cheaper rate, fuels can be supplied (up to a limit at concessional rate), toll may be abolished or reduced.
Some of the advantages that would flow if the Scheme were to be implemented
- With the abolition of all the existing taxes, prices of all the commodities and services would come down crashing.
- Practically one rate / price would prevail throughout the country—the dream of any government.
- We can compete in the international markets.
- One Nation—One Priceline (the dream of everyone) would become a reality.
- State Governments would not easily give up their right to tax. State may be allowed to levy similar TDS based tax in their jurisdiction. It is hoped that States would use this provision with discretion.
- With the abolition of Income Tax, everyone would be encouraged to contribute their maximum.
- Employment as also enterprises would get a boost.
- Presently the amount that we earn as INCOME (for which one toils hard) is subjected to tax.
- However, enormous sums taken towards House Building, purchase of car (a luxury in the present context), start of a business etc. are not subject to any tax simply because they are termed “LOAN” even though they give huge benefits to the individuals/business. Strangely enough the interest paid on the Housing Loan is also entitled to Tax Rebate. We would term this concession as unintended or undeserved benefits. This should be withdrawn. The saving should be diverted to the Pradhanmantri Aawas Yojana.
GENERAL – Assume that one has 60 crores in cash. If he deposits the money into the Bank, he would get Bank interest. He would be required to pay TDS at the time of withdrawal starting from as little as 1%. There is always the risk that someone would rob him and he cannot go to the Police with any complaint. All the cash spent by him in cash would not remain outside the banking. Some of the recipients would put the cash so received into the Banks. Also he would like that after his life time the cash go to his heirs. It may be difficult to peacefully pass on his huge cash to his heirs. Therefore in most of the cases individuals would prefer to bring their unaccounted money into the Bank.
One can go on and on this vein. We would refrain from doing so. We would like to conclude –
- Abolish all the existing taxes.
- Introduce a bank centric graded TDS against withdrawals of money from the Banks.
- It would eliminate the interface between the tax authorities and the tax payers—the source of corruption, malpractices and generation of black money.
- More money in the hands of the individuals, more demand for goods/services, and more employment.
- To put it succinctly “While enjoying PERSONAL BENEFIT (by way of spending money) share a percentage of it for GENERAL BENEFIT.
- This tax can be appropriately called ‘BENEFIT TAX’ or “KALYAN KAR – कल्याण कर” – meaning Kalyan Tax or do Kalyan.
I am aware that the present write-up is not perfect. However, I trust that I have been able to make myself understood. Friends, if convinced, it is for you to take up the issue nationwide and see that something worthwhile emerges.
I carry the simple suggestion for all. One is free to take this seriously or laugh it off. Everyone has the free will.
Thanks for having gone through the presentation. Let Almighty guide us! JAI HIND.
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