For past two years , I have been advocating total abolition of Personal Income Tax
Not because , a few countries such as Saudi Arabia , UAE , Qatar , Oman , Kuwait , Bahrain etc , have NIL personal income tax
But , even for a less developed country like ours , it makes a lot of sense
Here is why :
* Today's Hindustan Times reports following study by Price Water-house Coopers ( PWC ) :
" Average take-home salary as a % age of total salary " - are :
> Saudi Arabia................ 98.86
> China....................... 62.05
> Germany................... 60.61
> USA.......................... 60.45
> UK........................... 57.28
> India......................... 54.90
> Italy......................... 50.59
* It is obvious that Saudi Arabian citizens take home more because there is NO personal Income Tax there
* In India , our " Take home Salary " is only 54.90 % , because we pay a very
high personal income tax
* Of the total revenue receipt of Central Government ( 2013-14 est ) ,Personal Income Tax contributes only 23 % ( approx Rs 2.4 lakh crore )
* If personal income tax were to be abolished , this revenue will be lost
But , here is the Upside :
* India's current Household Saving Rate = 21.9 % of GDP
* That means our total Household Savings = Rs 24.72 lakh crore ( 2012-13 )
* Of these ,
> Rs 16 lakh crore are tied up in unproductive Physical Assets (Gold/Land)
> Rs 8 lakh crore are invested in Financial Assets (Bank / Mutual Funds)
* If Personal Income tax is abolished , it is possible that our Household
Savings Rate may go up from 30.1 % to 45% of GDP (it was 40% in past)
* That would add Rs 12.36 lakh crores , raising total to Rs 37 lakh crore !
* And most likely , the proportion of investments would be ,
> Rs 7 lakh crore in Physical Assets , and
> Rs 30 lakh crore in Financial Assets ( Productive use )
And that's not all !
* With NIL personal tax to pay , all the cash ( black money , no doubt ! ) ,
lying in bank lockers , will get deposited in official bank accounts , within
one year
Now , couple this BOLD & IMAGINATIVE step with :
* Creation of SPVs , dedicated for building Infrastructure . No questions asked
for amounts invested in these SPVs . No dividend tax for 10 years
If implemented , there will be no reason for us to go begging China / Japan / USA for investments in Infrastructure / Manufacturing etc !
* hemen parekh / 12 Nov 2014
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Not because , a few countries such as Saudi Arabia , UAE , Qatar , Oman , Kuwait , Bahrain etc , have NIL personal income tax
But , even for a less developed country like ours , it makes a lot of sense
Here is why :
* Today's Hindustan Times reports following study by Price Water-house Coopers ( PWC ) :
" Average take-home salary as a % age of total salary " - are :
> Saudi Arabia................ 98.86
> China....................... 62.05
> Germany................... 60.61
> USA.......................... 60.45
> UK........................... 57.28
> India......................... 54.90
> Italy......................... 50.59
* It is obvious that Saudi Arabian citizens take home more because there is NO personal Income Tax there
* In India , our " Take home Salary " is only 54.90 % , because we pay a very
high personal income tax
* Of the total revenue receipt of Central Government ( 2013-14 est ) ,Personal Income Tax contributes only 23 % ( approx Rs 2.4 lakh crore )
* If personal income tax were to be abolished , this revenue will be lost
But , here is the Upside :
* India's current Household Saving Rate = 21.9 % of GDP
* That means our total Household Savings = Rs 24.72 lakh crore ( 2012-13 )
* Of these ,
> Rs 16 lakh crore are tied up in unproductive Physical Assets (Gold/Land)
> Rs 8 lakh crore are invested in Financial Assets (Bank / Mutual Funds)
* If Personal Income tax is abolished , it is possible that our Household
Savings Rate may go up from 30.1 % to 45% of GDP (it was 40% in past)
* That would add Rs 12.36 lakh crores , raising total to Rs 37 lakh crore !
* And most likely , the proportion of investments would be ,
> Rs 7 lakh crore in Physical Assets , and
> Rs 30 lakh crore in Financial Assets ( Productive use )
And that's not all !
* With NIL personal tax to pay , all the cash ( black money , no doubt ! ) ,
lying in bank lockers , will get deposited in official bank accounts , within
one year
Now , couple this BOLD & IMAGINATIVE step with :
* Creation of SPVs , dedicated for building Infrastructure . No questions asked
for amounts invested in these SPVs . No dividend tax for 10 years
If implemented , there will be no reason for us to go begging China / Japan / USA for investments in Infrastructure / Manufacturing etc !
* hemen parekh / 12 Nov 2014
--------------------------------------------------------------------
Make
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