At the presentation to a sub-group of Secretaries set up by PM, a Pune-based tax research outfit, ArthKranti, proposed to replace the present tax system with a single 2 % levy per receipt in bank accounts and to reatin the import duties of the present system.
Arthakranti’s proposal envisages a system that does not tax consumption or income, as is the case now, but the “velocity of money”.
“It was clarified by the official who made the presentation that the ‘ground-breaking’ tax reform proposal is not for the consideration of the upcoming budget,” an official source, who attended the meeting, told The Hindu. The “innovative” proposal was aimed at reducing corruption and eliminating the cost of compliance for taxpayers, the source said.
Earlier when yoga guru Ramdev had called for the abolition of income tax, Arthakranti submitted this proposal in the run-up to the 2014 general election to the Highways Minister and former BJP president, Nitin Gadkari. Then, he was heading a BJP committee responsible for preparing its vision document on reforms in police, administration, judiciary, taxation and education.
The outfit has estimated that the levy it is proposing can be collected through the banking channel rather than the tax collection authorities. Without leading to a loss of revenue, it will plug tax evasion and avoidance. Arthakranti’s calculations show that the 2 per cent tax will yield Rs. 40,00,000 crore. The claim was contested by the eminent economist and former secretary-general of the FICCI, Rajiv Kumar, who said that at 2 per cent, the proposed new tax will yield Rs.14,00,000 crore. In 2014-15, the Centre’s total tax revenue (revised estimates) were Rs. 9,084,63 crore.
“The group of Secretaries are unlikely to recommend that Arthakranti’s proposal be forwarded to the Ministry of Finance … We did not think that the Prime Minister would favour it since there isn’t a single precedent of a developed country adopting such an idea… ,” the source said.
-More at TheHindu