Biggest
Problem with Zero Tax ?
===========================
Only two days back , I wrote following blog ( and sent
it to Cabinet Ministers / MPs / MLAS etc ) , urging total abolition of Personal
Income Tax :
Then , on Sunday I came across a write
up ( Times of India ) titled :
“ How voting for higher taxes can make us
all richer “
In an essay published in AEON magazine ,
Associate Professor of Philosophy , at the Central European University in
Budapest , Philip Goff says :
“ The biggest problem with zero or low
taxes is that , by voting for them , common people allow the rich to hold on to
a large share of their earnings, and this has become a hurdle for fair redistribution of wealth “
No doubt , abolishing Personal Income
Tax would enable the RICH to become RICHER
But ,
What
Would They Do [ with the tax-money saved ? ]
Philip Goff may want to read my following blog ( 03 May 2016 ) :
For
the year 2012-13, Personal Income Tax
paid by individuals is as follows :
-----------------------------------------------------------------------------------
(
Number of Tax payers ) ( Total tax amount paid - Rs Crore )
-----------------------------------------------------------------------------------
(
3
)........
( 437 )....
Super Rich
(
5430
)........
( 8,907 ).... Rich
(
14 Lakh )........
( 253,656 ).... Middle Class
(
111 Lakh )........
( 23,000 ).... Neo Middle ( Minimum Slab )
(
162 Lakh ).........
( NIL )....
Poor ( Tax Exempt )
----------------------------------------------------------------------------------
(
Total = 287 Lakh ).........( 2.86 lakh*Crore
)
----------------------------------------------------------------------------------
Now
, I have repeatedly advocated total abolition of Personal Income Tax
So
, it would be natural to ask :
If
these people did not have to pay personal income tax , then what would they do
with this ( Rs 2.86 lakh*crore ) tax
amount saved ?
MY GUESS :
#
3 Super Rich individuals
They
might buy some more gold / ornaments / flats or take more holidays abroad
Of
course , the expenditure for the
purchase of flats and ornaments will help the
economy
#
5430 Rich persons
Some
of them would also indulge in buying gold / flats
Many
would buy luxury cars / luxury goods (
Consumer Durables , like domestic appliances or Consumables like expensive
clothes / ornaments / purses etc )
All
of this expenditure will , no doubt , help the economy grow and create more jobs
#
14 lakh Middle Class persons
From
the above data , it is obvious that it is this Middle Class persons ( 14 lakhs ) , who bear the brunt of the
Personal Tax collection !
And
, as Rajiv Gandhi once said , for every rupee of tax that they pay , only 15
paise worth of " Civic Services " ( infrastructure / drinking water /
health-care etc ), returns to them !
And
, on top of everything , they have no " Social
Security " of any kind !
So
, I believe that they would invest the saved
tax money in bank fixed deposits / mutual funds / life insurance /
Public Provident Fund etc , to ensure a small - but steady - source of income after retirement
Now
, if Rs 2 lakh*crore of this tax saving
were to become " Bank Deposits ", it would enable these persons to
raise their " Credit Rating / Loan Repayment Capacity " and take out bigger loans for homes / cars etc
This
would give a huge boost to our economy !
That
would also raise our Domestic
Saving Rate , once again , above 30 %
That
would also relieve some pressure on the Government to introduce a forced "
Pension Regime "
And
, if this group spends some more money in sending their girl-child to better
schools , they would be investing in a better
future of their children - a highly desirable type of expenditure
!
And
do not discount the long term social impact of investing for retirement
In
most middle class Indian families , parents today depend upon their SONS , to
look after them in their old age .
Male
child is THE only retirement assurance
for these people
When
tax savings make it possible for them to become independent of their male child
, the desire to have a male child ( at the cost of aborting a female child ) ,
will go down !
#
111 lakh , Neo - Middle Class persons
They
have just entered the minimum tax slab ( 10 % ? )
Without
doubt , they would spend the saved tax money in buying
items of daily NECESSITY - food being the foremost ! May be some cheap
clothes !
By
being able to meet the Cost of Living
a little better , these persons would be able to live a dignified life -
even if living in slum-like conditions !
Their
tax-saving would just not be enough for
them to book a 250 sq ft flat !
And
since there would be no Personal Income Tax to be paid, no one would want to hide any income !
Every
rupee of income would get accounted for in official banking channels !
Other
than small daily purchases , large CASH
payments will disappear !
Official
payments ( through electronic transfer / credit cards / mobile wallets etc )
will dramatically go up !
Banks will get huge amounts of deposits and be in a position to engage in micro
- lending !
P2P
lending platforms will take off like a rocket ! Especially those "
RICH " and the " SUPER RICH " will now start lending to Start
Ups and Self Employed Entrepreneurs , through this P2P web sites
I
request Shri Arun Jaitleyji to seriously consider my suggestion in the
forthcoming Central Budget
I
am confident that not a single Political Party
will oppose this , either in Lok Sabha or in Rajya Sabha
It
will be a political " Harakiri " for anyone to oppose !
----------------------------------------------------------------------------------
03 Oct 2017
www.hemenparekh.in
/ blogs
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