Abolishing Personal Income tax - What do you say?

[swatkats]

Budget 2019: Should there be no income tax in India? Here’s what tax experts say

Union Budget 2019: During the time of demonetisation, there was some talk around abolishing income tax and bringing a consumption-based tax system. However, is it a good idea?

www.financialexpress.com

You work hard for the whole year and the government asks to pay taxes on your income, be it business or salaried job. But why?

I've felt this is robbery from a long time and when I looked up why UAE, Saudi or why people choose these countries for work is No tax on Personal income (Islamic law prohibits and is only okay if the Country does not have money for governance).

Govt can increase the taxes on luxury items or make it 18 and 28% on purchase (GST) instead of 5 and 12%.

If the earner is getting his full salary, He will invest the money in real estate, gold, banks or spend it (which is again some more taxes) which would also attract investments for companies.

Instead, Stringent collection of taxes from business, Customs or corporates should be done and Individuals should not be harassed.

Collecting Personal income tax is a sin in my opinion! Share your thoughts and avoid BJP-Congress or Anti national type comments (I'll report such ones if someone posts)

Only point of Subramanian swamy I agree to

 

[skoka123]

Basically what you are suggesting is a consumption tax. In a welfare society and socialist form of governance it is the responsibility of the government to take care of all its citizens. With rate of unemployment and the disparity in earnings and spending power the poor will get greatly impacted. Already with no avenue to increase tax revenue the governments are milking the people with heavy taxes on Liquor, Cigarettes, Petrol and Diesel. They are reported to have collected 20 L Crores in addition to what they usually collect in just the past 1 year due to frequent increase in prices of the Petrol and Diesel. Now imagine a situation where government will increases taxes on everything you consume or use.

Today the major gripe of the 4% (or near about) of the income tax payers/assessees is that not only are they paying income tax but are also taxed for good and services. If you abolish income tax, then you are actually paving a way to increase your consumption tax which will burden the lower / no income group.

Edited: the percentage from 1.3% to 4%.

 

[mav2000]

Have a banking transaction tax instead of personal income tax. Charge more for cash withdrawals. This will limit movement of funds from:
1. white to black
2. force people to open bank accounts and get into the mainstream banking
3. Have better data collection on the economy
4. Slowly kill the black economy and include everyone in the tax net, while reducing the burden on those who pay tax for earning and consuming.

 

[skoka123]

Have a banking transaction tax instead of personal income tax. Charge more for cash withdrawals. This will limit movement of funds from:
1. white to black
2. force people to open bank accounts and get into the mainstream banking
3. Have better data collection on the economy
4. Slowly kill the black economy and include everyone in the tax net, while reducing the burden on those who pay tax for earning and consuming.

How Naïve of you!!! What lessons have we all learnt from Demonetization? People will find innovative ways to overcome the restrictions.

This was the great idea that pre 2014 BJP was peddling as an election stunt. The idea was to abolish income tax and tax 0.5% as bank transaction charge. Why did this never make it into reality? Demonetization has shown us that India cannot be rid of cash. If they implement your idea then that will be the death knell for Indian Banking system. Already, after what happened to depositors of PMC bank and the tension AXIS bank a/c holders had to go through, if you add tax on bank withdrawals people will simply stop putting money in banks. This in turn will have a devastating impact on the economy. No money going into bank means no money for lending which again means no money for private/small scale industries. Eventually this will lead to a monopoly / duopoly of banks a la Airtel and Jio.

 

[fractal]

Have a banking transaction tax instead of personal income tax. Charge more for cash withdrawals.

This will be more effective than demonetization and also far less disruptive

 

[t3chg33k]

The flip side of abolishing personal tax altogether in lieu of indirect taxation is that high earners will have better means of diverting their money and spending it elsewhere to altogether avoid paying any tax locally. Instead, the slabs should be set up in such a way that HNI still pay their dues.

With tax evasion being so rampant in this country, the onus unduly falls on the salaried class whose tax documentation is duly filed by the employer, with significant evasion by the non-salaried class. Hence, it can only be rationalised through indirect transaction-based taxation.

As a whole, need a more liberal approach to direct taxation while extending the reach of transaction-based taxation.

 

[skoka123]

This will be more effective than demonetization and also far less disruptive

Why do you think so? Please enlighten us. I, for one, will stop using digital payment modes and opt for cash payment wherever possible. Today if I earn Rs. 100 I pay Rs 33 as tax (assuming I am in 30% tax bracket). What I am left with is Rs 67. Now, when I go buy petrol I am paying over 60% of it in taxes. In effect I am paying the govt 33 + 60% of Rs 67 = Rs 73 as Tax. Now, the govt will replace all taxes with 0.5% transaction tax. Then all the govt will get is Rs. 0.5 as transaction tax on the Rs 100. The remaining Rs. 99.5 is taxed again 0.5% when I pump Petrol. In the end the govt gets just Rs 1 on Rs 100 of income and expenditure.

Let us for argument sake take the scenario where govt will remove income tax and levy transaction tax but not remove other taxes such as GST, Excise duty etc. Then it is a burden on people because people who are in no tax bracket (which around > 90%) will now have to pay a new tax? How is any government going to sell this to 90% of population who never paid any direct taxes?

The flip side of abolishing personal tax altogether in lieu of indirect taxation is that high earners will have better means of diverting their money and spending it elsewhere to altogether avoid paying any tax locally. Instead, the slabs should be set up in such a way that HNI still pay their dues.

With tax evasion being so rampant in this country, the onus unduly falls on the salaried class whose tax documentation is duly filed by the employer, with significant evasion by the non-salaried class. Hence, it can only be rationalised through indirect transaction-based taxation.

As a whole, need a more liberal approach to direct taxation while extending the reach of transaction-based taxation.

What you will have to realize if what if people reduce their transactions for a period? Where will the government get the money from?

 

[kalph09]

Middle East countries have tons of cash made out of dinosaur juice handed out to its citizen but for how long? They have starting taxing certain entities including individuals.

May we can look at Monaco model. Often dubbed as tax haven, they heavily tax on spending instead.

 

[fractal]

I, for one, will stop using digital payment modes and opt for cash payment wherever possible

This will need to be considered and a solution worked out to encourage movement to digital

Then all the govt will get is Rs. 0.5 as transaction tax on the Rs 100. The remaining Rs. 99.5 is taxed again 0.5% when I pump Petrol. In the end the govt gets just Rs 1 on Rs 100 of income and expenditure

I have seen a calculation that an universal 2% banking transaction cost (instead of 0.5%) will exceed all direct and indirect taxes collected today. This needs further analysis.

There will be a number of challenges no doubt in such a drastic change in taxes but I would not dismiss it out of hand. Also some taxes like custom duties, property taxes can still be retained.

 

[psyph3r]

Taxation is theft, end of story. To what degree you're looted depends on the country/govt.
At least in some countries you get something in return in the form of subsidized healthcare/education and above average infrastructure, here in India we get f*ck all in return.
The rich will find methods to hide their wealth/take advantage of the broken system, the honest hardworking middle class will bear the brunt and no one gives af about the poor anyways.
Our public transportation is probably the worst in the world and the govt. had the audacity to increase tax on bikes to 28% while increasing fuel prices incessantly.

Every other month we read about record GST collections in the papers but no one asks where and how the govt. is spending the money, I have seen zero improvement when it comes to anything and no projects have been announced that improves the condition of anything tbh.
I just don't get why there hasn't been a revolution or any opposition yet, people here have a high tolerance with their chalta hai attitude because they are too busy earning a living while the govt. robs them in broad daylight while distracting them with irrelevant issues.
Over the years I've indirectly arrived at the conclusion that we are surrounded by NPC's of some kind lol, any real person with an IQ of over 70 should be pissed at how some ridiculous things have become the norm but that isn't the case.

 

[burntwingzZz]

Agricultural income needs to be taxed as well , this gives lot of people the free hand

 

[rdst_1]

Agricultural income needs to be taxed as well , this gives lot of people the free hand

One of the reasons behind not taxing agriculture income is that most agricultural produce came under essential commodities act and hence the price and stock was supposed to be controlled by the govt. Since that is somewhat unfair, they were given the benefit of not being taxed. Also, not all agriculture income is untaxed. The income from dairy and livestock is taxed as normal income. And a certain portion of income from tea, coffee and rubber is also taxed. (These are some of the most successful ways to make money from agricultural activities and when govt saw that, they made sure these were taxed).

Apart from this, farming is one of the most unpredictable businesses out there with no guarantee of output whatsoever. This year, after diligently growing and nurturing my maize plants for 3 months, just a small 15 minutes storm razed down all my plants and this decreased my output to half of what was expected. Since earlier govts couldn't really provide much social security in such cases, one way was to give them the benefit of not taxing them when they were able to make some money once in a while. Trust me, most of the cases that you see of uber rich and successful farmers, they are cases of money laundering and politicians trying to hide their illegitimate income.

 

[burntwingzZz]

that's why i never mentioned farmer , i said agricultural income , i would rather make something like escrow that you have to deposit your taxes over there and if you have disasters like that you could withdraw it and you could also get an interest on it which would be taxable.

 

[dpandey]

You work hard for the whole year and the government asks to pay taxes on your income, be it business or salaried job. But why?

Interesting choice of words.

In the heading you mention income tax but start with 'hard work', which implies tax on labour. What is your opinion on rental income and capital gains?

I have always wondered why tax on labour is higher than capital gains tax. If we want to create more employment and push less money into speculation, shouldn't taxes on salaries be lower than tax on capital gains.

 

[GreenGrawlix]

Interesting choice of words.

In the heading you mention income tax but start with 'hard work', which implies tax on labour. What is your opinion on rental income and capital gains?

I have always wondered why tax on labour is higher than capital gains tax. If we want to create more employment and push less money into speculation, shouldn't taxes on salaries be lower than tax on capital gains.

Hit the nail on the head.

 

[Mr.J]

I have always wondered why tax on labour is higher than capital gains tax. If we want to create more employment and push less money into speculation, shouldn't taxes on salaries be lower than tax on capital gains.

AFAIK there was no LTCG tax earlier so it is a new thing.

The logic for low LTCG tax is to
1. Encourage investment habits from middle class instead of them relying on savings account, post office account etc.
2. Such investments are easy capital for Indian corporations and in turn is invested back in national economy.

 

[skoka123]

AFAIK there was no LTCG tax earlier so it is a new thing.

The logic for low LTCG tax is to

LTCG has been there for a long time. When in 2004 Chidambaram introduced Security Transaction Tax, if memory serves me right, the definition of Long Term changed. It used to be around 3 years (I could be wrong w.r.t. the exact tenure) which was revised to 1 year for transactions that had attracted STT at the time of acquiring the shares.

2. Such investments are easy capital for Indian corporations and in turn is invested back in national economy.

How does it result in being invested back in national economy? Example: I have 100 shares of a company that I bought for Rs 10 which is now trading at Rs. 1,000 after 10 years. Now how does LTCG help the company? The value of the stock would have been at Rs 1,000 based on the merits of the company and not if it attracts LTCG or STCG in the hands of the public shareholder.

 

[psyph3r]

India’s most abused taxpayers

Salary-earners pay highest per cent of income in taxes, get little in return and see their tax rupee get used for votes ‘Social equity in India means that a clerk earning Rs 6,000 each month...

timesofindia.indiatimes.com

 

[xkcd0137]

India’s most abused taxpayers

Salary-earners pay highest per cent of income in taxes, get little in return and see their tax rupee get used for votes ‘Social equity in India means that a clerk earning Rs 6,000 each month...

timesofindia.indiatimes.com

Quoting a reddit user's comment (on same article) who has put in better words than I can -

Ho ho ho ho. I’m completely against taxes in principle, but this was written by some Mumbai real estate developer as he smoked a cigar while looking out from his duplex flat worth crores in Bandra.

Just read the assumptions:

Firstly, income between Rs 50 lakh and 1 crore. It’s laughable. I’m not saying there aren’t a lot of people who do have this wealth, but that’s mostly their real estate assets. Income of more than 50 lakh? How many people do you meet everyday in India even earning a 10th of that, smart, senior professionals. [This article is just trying to portray the >50 lakh salary guy as the Victim and rest of all Indians being parasites living on his Tax money which is untrue.]

Secondly, flat income tax rate of 30%. There maybe a handful of countries where this exists, but India is not one of them, and so are most countries. We follow a progressive, not a flat tax system. This means we have tax brackets, but it also means you only pay income tax on the income in each bracket. If I earn 5 lakh+ rs, I’m not taxed 10% on 5 lakhs (50k) I’m taxed nothing on the first 5 lakhs (under new scheme) and 10% on anything above 5 lakhs. If I earn 5 lakh 10 thousand, my tax liability is 1k Rs (mostly hypothetical example, not exact tax slabs, not tax advice). So this article’s calculations are true, in a world which doesn’t exist.

Thirdly, yes, a lot of people live in Mumbai, but a lot lot lot more people live not in Mumbai. They don’t use or pay that much for their car and fuel. I don't agree with this.

Finally, boo hoo, poor one of the few wealthy people in India, how abused they are, look at the other 93% parasites, being...too poor to earn an income high enough to pay taxes, while forming 93% of the population, and really relying on Govt schools and hospitals, and pensions and welfare schemes. The government should really stop this parasitic behaviour and...force farmers, cottage industry owners, low paid office workers, pay a 30% income tax on their virtually non-existent income. Look at that wealthy Mumbaikar, he pays so much and taxes and gets nothing for it! Surely all children go to private school, everyone goes to private hospitals, and doesn’t get a pension. /s

****ing what. This is like US Republican Party level of trying to incite class war by demonising the poor for being poor while crying about how much tax billionaires have to pay cries and wipes tears with $100 bills

That system won’t and should never work in India. We simply have too many mouths to feed before we start worrying about the tax bill of Bandra residents in a tax system that doesn’t even exist. This article is like a bed time story for billionaires.

IMO, if the govt used this Tax money to strengthen the Govt Schools, Govt Hospitals and providing amenities for unprivileged/homeless rather than wasting on useless things like building statues, new parliament buildings, new planes, new cars, new spectacle, new dresses, PM Cares scam, Aadhaar scam platform, advertisement, buying MP/MLA, paying Godi media, etc., I will whole-heartedly pay even more tax but..

 

[skoka123]

Sometimes I wonder why the rich think the poor are the parasites of this society. Don't they realize that most of them had the privilege of being born in either a rich family or having a had an opportunity to get a good education that they today are rich? The same applies to religion, caste or community. It is by chance that one is born into a family that is rich or a majority religion or community etc. Once we put ourselves in the shoes of the minority or the poor would we still think the others are parasites?

I think taxes are good for the country when it is spent for the good of all the people.