According to the Narendra Modi led BJP government, the recent demonetisation is only one in a series radical economic reforms aimed at transforming India. The endeavor to put in place a transparent system of taxation would prove very popular with the people and reinforce that the government as being decisive about tax and other reforms. So certainly it is very desirable; but is it possible?
Earlier this year, a Pune based tax research organisation called Arthkranti make a pitch to the Prime Minister and floated the idea of scrapping all taxes while imposing a single 2% tax levy on all receipts into bank accounts while retaining the current import custom duty as-is.
The economic think tank also recommended withdrawal of all high denomination currency and shifting to cashless transactions which would attract no transaction tax up to Rs 2000.
It was Anil Bokil of Arthkranti whose brainchild it was to scrap the Rs 500 and 1000 notes; a move he terms as “currency compression” and a “surgery done without administering the patient the dose of anaesthesia”. He predicts that it will be possible to go almost completely cashless; with Rs50 being the highest currency denomination. This is his argument: “country like us where 70% of the population survives on just $2 per day, why do we need currency notes upwards of Rs100?”
It isn’t just Bokil, BJP’s Subramanian Swamy has also frequently spoken about the abolishment of income tax; in his view the abolishment would lead to better savings.
Many also believe that income tax incentivizes the creation of black money. If there is no income tax to be paid, why would people hide their income? If there is no hidden income there are no black money stashes.
Earlier this year, released income tax data revealed that just about 3.81% Indians pay income tax (just about 4.8 crore tax assesses in India)
Countries such as Qatar, Oman, Bermuda, Monaco, the Cayman Islands and several others have no income tax levy.
Probably not. Though it would lessen the pressure on the overburdened middle class, this direct tax will probably not be abolished just yet. The alternative of a flat tax (as suggested by Arthkranti) obviously has many voices in favour and many against. It's not happening yet though, so no need to get excited or worked up. The expectation that is coming through though is that personal income tax rates will be slashed in the coming budget. We’ll just have to wait and watch won’t we?
Do you have something interesting you would like to share? Write to us at [email protected]
