Highlights

Excessive Regulations and a Confiscatory taxation regime encouraged movement of money out of India into foreign Banks -Practical ways to induce such Indians to bring such money back into India which will also, benefit the Nation, must be implemented.

Key Concepts

A Confiscatory Tax regime and Anti-Business bias, a ‘Suspect, Inspect, Harass and Confiscate’ regime of the early decades after Independence motivated the then wealthy to get their wealth out of the Country.

• Corruption in the Political and ‘License Raj System’ created more undeclared wealth, most of which was also, moved out of the Country.
• A pragmatic way of bringing this wealth back into India must be worked out, perhaps as suggested below.
• A pragmatic and broad-based tax regime and domestic investment opportunities must be worked out to make such money transfers out of the Country unattractive and hence, unnecessary in future.

Key Facts

• Indians have the most money in Foreign Banks, over three times that of the Russians who are next.
It is a gross misunderstanding to assume that Income Tax (I.T.) is the only way to collect tax for the Government. Today a comprehensive and simplified Goods and Services Tax (GST) is far more transparent and equitable.
• It is a gross misunderstanding to assume that Income Tax (I.T.) is the only way to collect tax for the Government. It was introduced in 1913 1913 in the USA in the then context of being unable to collect the revenue, especially of produce, across a vast country. Today a comprehensive and simplified Goods and Services Tax (G.S.T.) is far more transparent and equitable.
• Income Tax is paid by about three percent of our Population and most of such Taxpayers are in Government Service (where it is only a case of moving money from one Government pocket to the other).
• The cost of monitoring and collection of Tax is a very major part of the revenue collected as Income Tax and thus the actual net revenue is that much less. It is likely that such costs, considered at the current market value of the capital assets and the maintenance costs thereof and of litigation, travel and the perks, pensions etc also, incurred, will be more than the Tax collected from the non-governmental tax payers / employees. (See- “Equity in Taxation & Comments on I.T. & G.S.T.)

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