Sunday, 4 January 2015

A VIRTUOUS CIRCLE ?

For over two years now , I have been advocating ,


>   " Inverse Taxation Regime " both , for Personal Income Tax as also for Corporate Tax

       The more you earn , the less tax ( rate on next higher slab ) you pay

>   For Corporate , the more people you employ , the less tax ( rate on next higher slab ) you pay


>   Even total abolition of Personal Income Tax


There are over a dozen Countries where there is NIL personal Income Tax

So , there is a precedent that this can work  !

If Personal Income Tax was to be totally abolished , what can / may  happen ?


*   There will be no incentive for tax evasion / avoidance 

     This will be a permanent FULL STOP to future generation of Black Money

*   All payments will be received by cheques and deposited in Bank Accounts

*   All stashed away Black Money will , some how , on its own , find its way in bank accounts, - including Black Money lying in Foreign Banks , making SIT redundant !

     This is the ONLY WAY , NDA  government can redeem its promise !

*   Savings rate will go up dramatically

*   That will lead to greater purchasing power for all people

*   Leading to higher domestic consumption of FMCG / Consumer Durables

*   This will result in huge collection of GST , offsetting revenue losses

*   Demand will go up , boosting manufacturing

*   With rise in manufacturing , sub-contracting / outsourcing will increase , giving a big boost to MSME sector 

*   If manufacturing goes up , employment / self-employment ,  will go up

*   For a change , we as a Nation , will learn to celebrate , 

     #    Wealth Creation as a means to reduce poverty

     #    World-size Companies to take on the World

*   There will be less pressure on demands for higher salaries / wages

*   If salaries / wages do not rise , inflation will ease

*   Cost of manufacturing too , will go down

*   Era of " Low Cost Economy " will set in ( VIRTUOUS CIRCLE ? )

*   Savings will move from gold / land to Financial Assets

*   With a low cost structure , our products / services  will become , internationally competitive and exports will go up

*   That will improve our current negative Trade Balance / CAD

*   This ( abolition of Personal Income Tax ) should be coupled with SPVs for 

     #    Infrastructure Projects ( especially Smart Cities / Corridors etc )

     #    Educational Institutions

     #     Skill Development Institutions

     #     Health care Facilities

     #     Solar Power ( Eqpt Mfr / Generation / Transmission / Distribution )

     #     Digital India ( Broadband ) Network


     No questions must be asked as to the source of money invested in such SPVs

    All income ( Corporate Income or Personal Income by way of dividends / interests etc ) arising out of investments made in such SPV , must be tax-exempted

SPVs , themselves , must not need to pay any taxes for 10 years 

*   What else  ?

I hope our newly constituted " Niti Ayoga " will examine my suggestion and guide framing of  

 >    2015 Central Budget NITI 


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hemen  parekh / Jan 05 , 2015

www.hemenparekh.in

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