Prosperity

Prosperity arises out of a stable and consistent policy environment that rewards savings and encourages entrepreneurship. This is best done by implementing good laws and policies, and suitably amending existing questionable laws and policies. Announcing a policy of taxation to be implemented over a few years, with some steps taken in this Budget itself. The SEZ scheme, revised as deemed necessary, would promote Centres of Excellence and Prosperity. Corporate I Industrialized farming and related Businesses would greatly promote Rural development and reduce urban emigration. (See – ‘’Agricultural Reforms “Krishi Jagruti” Scheme – Own your Farm as
a Share Holder”).

There should also, be a better understanding of the following.

1.Taxation

Research has shown that a property structured Consumption / Expenditure/ Goods and Services Tax (GST) is the most equitable Tax regime and is far more conducive to long term prosperity than Income tax and is also, easier to implement. It also, discourages tax evasion.

The GST regime, the present Government has introduced, is a very good step however, its rules and regulations need to be greatly simplified convenient and ‘Saral’(Easy) implementation on a self-assessment basis, with regular verification and, with effective penalties for those found evading due payments is essential. It should also, be made more comprehensive and all-encompassing and be tax payer friendly. The ruling principle should be ‘Trust but verify’ and not ‘Suspect, Inspect, Harass & Confiscate’, as it is today.

There is presently a call to compensate for major tax rate reductions by increasing the income tax base but in the present circumstances in our Country this is deemed impossible, especially as Agriculture is a State subject.

The need for Income Tax in a comprehensive GST regime no longer exists, especially as the real cost of the I.T. Department viewed comprehensively at market rates is perhaps more than the I.T. collected from the real payers who are less than one percent of the population as the other two or three percent out of the total, who actually pay income tax are Government employees for whom it is compensated by increases in VDA allowance, and really does not add to the revenues of the Government. Now after Demonetization and GST, the number of taxpayers, especially from the small traders and businesses, has slightly increased, yet the concept remains valid.

Anyway, Income Tax is a regressive Tax on wealth creators and is also, a double taxation on them by again taxing them on their expenditure under GST in a comprehensive GST regime. It should actually be done away with. Repealing of Income Tax also, does away with the very concept of ‘Black Money’. Demonstrate ‘Trust’ in our people. To avoid prolonged debate in the Parliament, it can be done immediately by the Government reducing the rate to ‘Zero’.

A more comprehensive Goods and Services Tax, simplified in execution and that which actually inherently discourages evasion is the ONLY tax that is required. Schemes such as Banking Transaction Tax are not only not practical but are also, not required. (See – Bank Transaction Tax Proposal).

Also, keeping the interest on deposits on savings low, except for long term deposits and pension funds, will encourage greater circulation of money and hence, greater employment and growth. After all it is the circulation of money that generates employment and growth. Encourage investment in equity markets through properly regulated suitable financial organizations to allow people to share in the growth of wealth in the equity markets. (See -Agricultural Reforms ‘Krishi Jagruti scheme and Garibi Hatao, Action Plans to solve the problems of Agriculture and Poverty’).

Salaries, Remunerations, Dividends and Interest income can all be deemed as derived from Service and hence, charged Service Tax under GST preferably at five or six percent, in the hands of the payee or employee, but collected upfront by the payer or employer as is Tax Deducted at Source (TDS) at present.

Since, even capital gains from property sales can easily be seen as having been derived from the development provided (a Service) by the Government, the difference in the original purchase cost duly indexed to the inflation of each year, from the present sale price should also, be deemed liable to Service Tax preferably at five / six percent in the hands of the purchaser. There then would be no need for Capital Gains Tax thereon (See – “Equity in Taxation & Comments on I.T, G.S.T). Capital gains on sale of equity can also be done away with if the short-term benefits are taxed under G.S.T.at five/six, or even 10/12 percent, and the long-term benefits at one, or even five/ six percent.

Also, keep the GST slab rates at one, five/six and 10/12 percent. In order to keep the costs of food items and other essential goods low it is recommended that – Food items sold unpackaged or openly be taxed at one percent and other essential goods and services and household items and packaged food items taxed at a maximum of five / six percent and all the rest at 10/12 percent. Make the regimen broad based, applicable to ALL. There can be no zero percent product or transaction as a zero-rate product does not allow for monitoring and creates distortions and most times such products, e.g. grains, are dealt in lakhs of tonnes.

Taxation of Enablers must also, be kept low at one or five/six percent. (See – Pricing and Taxation Policy- for Fuels and other Enablers).

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