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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