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- The other way around!
The other option of completely eliminating personal income taxes is also a good idea.
But then the taxes have to be levied on all goods.
This means the headache for businesses continue.
May be a good alternative taxing mechanism can be evolved like one currently discussed (banking transaction tax).
Although the 1st post method (direct tax on every one proportionate to income) appears the method of least headache but probably loss of jobs for many accounts guys and CAs.
Abolishing income-tax feasible, experts say - The Times of IndiaCommentQuote0Flag
I really liked your initial Idea. Taxation based on income proportionatly is a novel method and would be fair to everyone irrespective of rich/poor..The biggest roadblock I envision is how would one enforce, guage the economic status and collect it? If one does not declare then there is no way for the government to find it. If given a choice everyone of us will withhold paying tax by showing less income, wouldnt we? Given the size of our population it would need hundred times our existing IT officers workforce to do the procesing and paperwork. This can be imposed only on the salaried class and who have bank accounts.
Let me give a suggestion to tweak your logic a bit..this is to continue the minimum tax on income by means of TDS but move the max chunk of it on consumption. we can bring utility/usage based tax where we can tax or charge based on the types of goods and level of usage..different rates for various slabs and good types. We have to encourage social responsibility and fair usage by allowing resource pooling and any personal service should be made costly while shared ones to be subsidized..Essentials like food/milk can be exempted from tax..while luxury buys like second car/house/electronics should be charged high tax rates, they should pay more property/water/road/wealth tax irrespective of income or they have to forego the luxury and use public services.
Regarding BJP's proposal, I truly think its path breaking and the majority are missing its motive. The main purpose to abolish income tax is to encourage people to spend more not ideally save more as its been widely reported..The more you get people to use our banking system and spend, more will be the liquidity in the market and economy will start moving and rupee will begin to strengthen.
If we can adopt the same line, I would say along with abolishing income/sales/excise tax and also impose a bank transaction tax, banks have to stop giving interest on savings account and deposit that with government. People should be encouraged to invest in stock/mutual funds/ETFS if they want to save..Interest of borrowing money should be increased and compulsarily all this has to be backed up by abolishing Rs 500/1000 notes to wipe out black money and deter cash transactions..or a flat surcharge of 10-15% to be charged if buying by cash.CommentQuote0Flag
- Idea of income based tax giving benefit of the expense is good, but may still leave loopholes for people to evade or atleast think of how to evade.
So if we explore in lines of of total removal, this will atleast not leave an opportunity for people to see how to evade. Also would the following not compensate to a large extent for the loss of the taxes for the govt.
- Cost savings from removal of IT offices, employees, houses/cars etc
- Removal of tax breaks to corporates, association of people etc., as they would not pay any tax
- Gradually reduce and remove subsidies on fuel, gas etc.
- Reduction of inflation as manufacturers will hopefully pass on the benefit to the consumer and get prices down
Anyways as per the FM's finance bill statement less than 50000 people all over India earn over a crore.CommentQuote0Flag