Dear Members of Finance Panel :
Your “ Terms of Reference “ does not cover “ Personal Taxation “ but I send my following blog , thinking , it
might interest you
With Regards,
hemen
parekh / Mumbai
(
M ) +91 - 98,67,55,08,08
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
,
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 !
-----------------------------------------------------------
02
Oct 2017
www.hemenparekh.in /
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