The Department of Revenue, Ministry of Finance has issued a report setting out the measures taken by the Government to tackle black money in the Indian economy.
Dept of Revenue's report on measures taken to tackle black money (281.2 KiB, 3,767 hits)
[…] The Ministry of Finance has released a comprehensive report issued by a Committee headed by the Chairman, CBDT, titled “Measures to Tackle Black Money in India and Abroad” (See also Fact Sheet on Black Money & Dept of Revenue’s Report on Black Money). […]
[…] a follow up to the report issued by the Department of Revenue on measures taken to tackle black money, the Ministry of Finance has issued a press release dated […]
Create Wealth to Create Jobs
Our current Personal Income Tax slabs are :
> Up to Rs 2.0 Lakhs………………….. NIL
> 2.1 Lakh – 5.0 Lakh……………….. 10 %
> 5.1 Lakh – 10.0 Lakh………………. 20 %
> More than Rs 10 lakh……………….. 30 %
That means , the more you earn , the more tax you pay !
How does this wrong tax regime hurt our economy ?
This regime ,
> Punishes honest people
> Penalizes wealth creation
> Encourages creation of ” Black Money ”
> Provides incentive for tax evasion
> Diverts resources into unproductive assts such as cash/gold/land etc
> Stops people from working harder / smarter
With this regime , people tend to ask :
> Why should I work hard and earn more , if the more I earn the more I
pay ?
> Why not evade paying taxes by hiding real income ?
> How will I ever be able to buy that 1 room flat costing Rs 50 lakhs ? I
need Rs 20 lakhs by way of black money to buy it ! Where do I get that ?
> For every rupee that the government collects from me as tax , only 15
paise come back to me in the form of civic amenities .
A few years back , the tax regime was worse !
One ended up paying , by way of tax , Rs 0.93 from every rupee earned !
And after heaping on the honest tax-payers , all such disincentives , how much does our government collect by way of taxes ?
> Total Tax Receipts ……………………………….. Rs 12.4 Lakh Crores
> Personal Income Tax contributes………………..Rs 2.47 Lakh Crores
Is there a way to raise that Rs 2.47 lakh Crores to Rs 247 Lakh Crores ?
Can we raise it by 100 FOLD ?
I am not an Economist ( my advantage ! )
So , here is my crazy suggestion
” Inverse ” the tax slabs as follows :
> Up to Rs 2 lakhs………………… NIL
> 2.1 – 5.0 lakhs…………………. 10 %
> 5.1 – 10 lakhs………………….. 8 %
> 10.1 – 20 lakhs…………………. 6 %
> 20.1 – 50 lakhs………………… 5 %
> 50.1 – 100 lakhs………………… 3 %
> Above 100 lakhs…………………. 1 %
What is likely to happen with such ” INVERSE TAXATION ” regime ?
Following few things :
> Total personal tax payer base will go up dramatically from current 4
crores tax-payers
> Total personal tax collection too , will rise dramatically
> Today , only 1 % of 4 crores tax payers ( approx 4 lakhs ) , contribute
nearly 63 % of personal tax revenue ( of Rs 2.47 lakh crores )
This ratio will change to , may be , 20 % of tax payers !
> with this ” INVERSE TAX REGIME ” , there will be no incentive to evade
taxes and to generate ” BLACK MONEY ”
The more you disclose as your income , the less you pay by way of taxes
> For a change , we will learn to reward honesty / efficiency / productivity !
No need to bribe those Income Tax officers !
> Suddenly , lakhs of crores of BLACK MONEY , stashed away in bank
lockers / gold / land – and , of course those Swiss bank accounts – will ,
suddenly become ” WHITE MONEY ” !
> There will be a huge surge in bank deposits ( – even with , the inevitable
lower interest rates )
> Banks will be awash with funds to finance businesses / infrastructure
projects etc , encouraging entrepreneurs / self-employed to set up new
businesses ( at 2 % interest rates of loans ) and generate millions of jobs
> There will be a phenomenal rise in Capital Markets
Now couple this ” INVERSE TAX REGIME ” , with the following ” TAX FREE ” investment schemes , by creating Special Purpose Vehicles ( SPV ) :
> NaMo MEGA-CITY SPV
To implement Narendra Modi’s ambitious project to build 100 smart cities,
at an investment of Rs 70 lakh crores , in next 5 years
This project alone will create 5 million new jobs , every year
> RaGa MEGA – JOBS SPV
To implement Rahul Gandhi’s equally ambitious project to provide jobs to
50 million youth over the next 5 years , at an investment of Rs 50 lakh
crores
In my opinion , such ” INVERSE TAX REGIME ” , coupled with the above mentioned SPVs , will herald an ” ECONOMIC ECO – SYSTEM “, which,
> will create jobs
> shun tax evasion
> reduce corruption
> convert all BLACK MONEY into WHITE MONEY
> channelize these WHITE MONEY into nation-building projects
To complete this ECO SYSTEM , we need to think ” Out of the Box ” in the matter of Corporate Tax Regime , as well
Current trend in industry , all over the world , is to
> Add highly productive , very expensive machinery to ” Automate ” all
manufacturing processes
> Reduce manpower by increasing ” Capital / IT Intensity ”
> Hire low skilled workers by transferring higher ” Skills ” to machinery
> Outsource manufacturing to countries where manpower is cheap
> Move out of ” Manufacturing ” and shift to ” Services ”
India cannot swim against this World-wide Trend
We must innovate, to not only survive but to grow in this scenario
Here is my suggestion :
Set in motion , ” INVERSION of JOB REDUCTION ” regime , under which ,
” The more jobs a company creates , the less Corporate Tax it pays ”
Example :
> Up to employment of 100 persons …………………………. 30 % tax
> 101 – 500 persons……………………………………………. 25 %
> 501 – 1000 persons …………………………………………… 20 %
> 1001 – 5000 persons ………………………………………….. 15 %
> 5001 – 10,000 persons …………………………………………. 10 %
> Above 10,000 persons …………………………………………. 5 %
Let us celebrate those who provide employment to large number of persons
Let us celebrate BIGNESS
Let us create hundreds of WORLD SIZE corporations and take on the World
On top of this , provide additional tax – breaks ( discounts ? ) to corporate as follows :
> Average Age of Employees at 30 years………………….. 1 %
> Ave age at 25 years…………………………………………. 2 %
> Ave age at 20 years …………………………………………. 3 %
Of course , very strict and transparent rules will need to be framed to
compute,
> Number of Employees ( Permanent – not probationers / trainees )
> Average Age ( as on 31 March of Tax year )……etc
But , here is an important aspect of this ,
” Incentivize Job Creation ” Scheme
Today’s labour laws make it extremely difficult – if not impossible – for employers to layoff / retrench workmen , if demand shrinks
Hence , to take advantage of this Scheme , employers are unlikely to hire thousands of youth , if they cannot easily trim the workforce , to match the shrinking demand
So , an important corollary of this Scheme is to modify our existing Labour Laws to facilitate layoff / retrenchment , when situation so demands , while protecting the interests of the workmen concerned
And , last but not the least , permit each and every candidate – and the political parties as well – to spend ANY AMOUNT on election campaigns ,
without any restrictions as also accept any amount of Corporate Donations
by cheque
I rest my case !
* hemen parekh ( 27 Feb 2014 / Mumbai )
ALL THESE STEPS ARE MERE WASTE. THE ONLY SOLUTION IS CONDUCT NARCO ANALYSIS ON THE OFFICERS IN INCOME TAX AND CUSTOMS & CENTRAL EXCISE DEPTS. tHEN ONLY YOU GIVE THEM RETIREMENT BENEFITS. tHIS SOLVES THE PROBLEM IN 24 HOURS.