Dear
Business Leaders / Economists / Editors / TV Anchors :
Each
one of you have considerable influence over the Government officers in charge
of framing policies
As
leading " Opinion Makers " ,
your contribution in Transforming India , is invaluable
If
you believe that my suggestion detailed below , merits consideration , then I
request you to support it in whatever way you feel appropriate
One
of which could be, forwarding my following 2 year old blog to your employees /
contacts ,
requesting
them to forward it to Shri Arun Jaitley-ji ('ajaitley@del5.vsnl.net.in' )
- before he firms up the next Union Budget proposals
Who
would not whole-heartedly support ,
Abolition of
Personal Income Tax ?
With
regards,
hemen
parekh
www.hemenparekh.in >
Agenda for Reforms
Marol
, Mumbai , India
(
M ) +91 - 98,67,55,08,08
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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 (at top slab ) !
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 "
There will be no resistance to accept ALL payments by cheque / electronic clearance !
There will be no resistance to accept ALL payments by cheque / electronic clearance !
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 Shri 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 %
> 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
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
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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