Kailas
Pl
send out my following blog to 400 MPs, after elegantly formatting , with large
fonts :
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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
)
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