What would happen ?

What  would  happen  ?

What would happen if Personal Income Tax was totally abolished ?

Before answering that question , let us refer to what Shri Jaitleyji told the Consultative Committee attached to the Finance Ministry , yesterday :

·         The number of tax payers rose to 6.26 crore in 2016-17 from 4.72 crore in 2012-13

·         The revenue collections in case of Direct Taxes rose to Rs 8.5 lakh*crore during 2016-17 at a growth rate of 14.5 %

·         1100 searches were made from Nov 9 2016 to Jan 10 , 2017 , resulting in seizure of Rs 610 crore including cash of Rs 513 crore

·         Undisclosed Income of Rs 5,400 crore was detected and about 400 cases referred to the Enforcement Directorate and the CBI for proper action

The government is committed to widen the tax base by encouraging and incentivizing the NEW TAX PAYERS

So , from this , one thing is obvious

Government will need to forego a revenue of Rs 8.5 lakh*crore if Personal Income Tax was abolished – something very measurable

Followed by a question :

In such an event , from where would the government find the money to finance all its Infrastructure Development projects ?

What may not be so obvious to the Policy Makers is that , such a BOLD / UN-ORTHODOX / OUT-OF-THE-BOX , step would set in motion a VIRTUOUS  CIRCLE , where following things will happen :

*   There will be no incentive for tax evasion / avoidance 

     This will be a permanent  FULL STOP to future generation of Black Money

*   With NIL personal tax to pay , all the cash ( black money , no doubt ! ) ,
    lying in bank lockers , will get deposited in official bank accounts , within
    one year

*   All payments will be received by cheques and deposited in Bank Accounts

*   All stashed away Black Money will , somehow , on its own , find its way in bank

     accounts, - including Black Money lying in Foreign Banks , making SIT redundant !

   

*   Savings rate will go up dramatically

*   That will lead to greater purchasing power for all people

*   Leading to higher domestic consumption of FMCG / Consumer Durables

*   This will result in huge collection of GST , offsetting revenue losses

*   Demand will go up , boosting manufacturing

*   With rise in manufacturing , sub-contracting / outsourcing will increase , giving a big

    boost to MSME sector

*   If manufacturing goes up , employment / self-employment ,  will go up

*   For a change , we as a Nation , will learn to celebrate , 

     #    Wealth Creation as a means to reduce poverty

     #    World-size Companies to take on the World

*   There will be less pressure on demands for higher salaries / wages

*   If salaries / wages do not rise , inflation will ease

*   Cost of manufacturing too , will go down

*   Era of " Low Cost Economy " will set in ( VIRTUOUS CIRCLE ? )

*   Savings will move from gold / land to Financial Assets

*   With a low cost structure , our products / services  will become , internationally

    competitive and exports will go up

*   That will improve our current negative Trade Balance / CAD

*   This ( abolition of Personal Income Tax ) MUST be coupled with SPVs for  :

     #    Infrastructure Projects ( especially Smart Cities / Corridors etc )

     #    Educational Institutions

     #     Skill Development Institutions

     #     Health care Facilities

     #     Solar Power ( Eqpt Mfr / Generation / Transmission / Distribution )

     #     Digital India ( Broadband ) Network


     No questions must be asked as to the source of money invested in such SPVs

    All income ( Corporate Income or Personal Income by way of dividends / interests etc

    ) arising out of investments made in such SPV , must be tax-exempted

SPVs , themselves , must not need to pay any taxes for 10 years

Take away incentive to evade taxes , thereby stopping future generation

      of Black Money

*    Channel all existing Black Money ( locked up in assets , in India or

      abroad ) into the main stream of economy ( Infrastructure Building )

*    Enable current annual inflow of inward remittances from overseas

      Indians to go up from $ 70 Billion to $ 700 Billion

*    Through rapid development of Infrastructure , generate Self

      Employment for 12 million youth every year

*    Drastically reduce FDI requirement for rapid growth of economy

*    By cutting down on government outlay for Infrastructure , reduce govt

      borrowing from market and consequent debt servicing

*    Raise GDP to 10 % by 2018

Why  is  such a BOLD  step urgently required ?

Current tax regime ,

*   Punishes honest people

*   Penalizes wealth creation

*   Encourages creation of " Black Money "

*   Provides incentive for tax evasion

*   Diverts resources into unproductive assets 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 .

Dear  Policy Makers :

This is the SIMPLEST – EASIEST – CHEAPEST way to revive our ECONOMY , in a permanent manner , without ever needing any other stimulus

There is no stimulus greater than the Human Greed !

30  Sept  2017

www.hemenparekh.in / blogs

With Regards,

hemen  parekh 

www.hemenparekh.in 

hcp@RecruitGuru.com 

( M ) +91 - 98,67,55,08,08