A Pune-based tax research outfit, Arthakranti, has come out with a proposal to revamp the taxation system in India. The outfit, in its proposal, seeks to abolish income tax and over 30 local, State and Central taxes.
- In this regard, the outfit recently gave a presentation before a sub-group of Secretaries set up by Prime Minister Narendra Modi.
DETAILS :
- It advocates replacing the present tax system with a single 2% levy per receipt in bank accounts and recommends that just import duties be retained from the present system.
- The proposal envisages a system that does not tax consumption or income, as is the case now, but the “velocity of money”.
- The proposal is aimed at reducing corruption and eliminating the cost of compliance for taxpayers.
- The outfit has estimated that the levy it is proposing can be collected through the banking channel rather than the tax collection authorities.
Benefits:
- Without leading to a loss of revenue, it will plug tax evasion and avoidance.
- Arthakranti’s calculations show that the 2% tax will yield Rs. 40,00,000 crore.
Demerits :-
Bank will get large amount of money which they dont required
Undisclosed money transactions will be increased in economy
Very difficult to track and impose a limit above which 2% banking transaction will be imposed ==> people may also start barter system among themselves
This is not the first time such a proposal has been received by the Centre. Several governments have earlier discussed plans to abolish income tax but rejected them.
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