Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Saturday, 30 September 2017

Waiting to be proved wrong !



In my earlier blog :








I had assumed following figures :


·         ALL government departmental cars are driver driven


·         Run ( max ) of 100 km per day ( 20,000 km in 200 working days )


·         At 12,000 km / year , total cost ( fixed + variable ) per km works out to Rs 22 , for a self driven petrol car ( no salary of a chauffer ) -  CRISIL Research Study


·         It would be safe to assume that this would be Rs 25 / km for an Electric car


·         As against this , cost of hailing a UBER / OLA works out to Rs 19 / km  !



Now consider these assumptions in light of the following :


·         Two days back , EESL placed a order for purchase of 10,000 electric cars , at Rs 11.2 lakh each ( Total Value = Rs 1,120 crore )


·         EESL will lease out these cars to Government Departments / Agencies , at a lease rent of Rs 45,000 per month ( Rs 540,000 per year ) – which , I assume , does not include a driver ( Hindustan Times / 30 Sept )


·         So , that works out to Rs 27 per km ,( for 20,000 km / year ) , for the leasing department , without the salary of the driver



·         If the salary of that “ departmental driver “ is ( say ) Rs 300,000 per year ( Rs 25,000 per month , inclusive of all perks / retirement benefits / leave etc ) , then that would add another Rs 15 / km for annual 200,00  km


·         So , the total cost to the government department leasing the car from EESL , adds up to Rs 42 / km ( Rs 27 + Rs 15 )



QUESTIONS :


If my assumptions are correct ( I look forward to EESL proving me wrong ! ), then following questions arise :



#   Why should government departments incur a cost / km of Rs 42 , when it could
     hire a UBER / OLA , for Rs 19 / km ?  An extra of Rs 23 / km !



#   Eventually , when EESL manages to replace existing 500,000 government owned
    ( petrol / diesel ) cars with Electric Cars , this extra cost could add up to Rs
     2,300 Crore/year (5 Lakh cars * 20,000 km per year * Rs 23 / km difference )


      
     Is this justified by saying : Since EESL is a government-owned company , this is
     only transferring the money from one pocket to another :  ?




#   As per report in Hindustan Times ( 30 Sept ) , Government departments are
     currently paying Rs 50,000 per month for leasing cars from private agencies
    ( about 150,000 cars , out of a total of 500,000 cars )


    Is it not entirely possible – and nearly certain – that , if EESL tender was for “
    Leasing  instead of Buying “ , TATA and M&M , would have quoted Rs 15 per
    km ( inclusive of a driver ) , thereby saving the government , Rs 2,700 crore per
    year   ( 5 lakh cars * 20,000  km/year * Rs 27 / km : :  Rs 42 – Rs 15 )  ?



#   Cost of Lithium-ion Battery constitutes between 50 % - 70 % of the Selling Price
    of an Electric car . And this cost is dipping by approx. 20 % per year


    So , the cost of that battery ( to TATA ) must be around Rs 6 lakh today , out of
   its quoted price of Rs 11.2 lakh per car


   Now , if  5,000 cars are likely to be delivered in 2018 and remaining 5,000 in 2019
   then the battery costs would drop to below Rs  5 lakh by 2019



   Did the EESL incorporate a “ PRICE   DE-ESCALATION  CLAUSE “ , in its tender ?



I hope Arnab Goswami ( or anchor of any other TV Channel ) gets to read this and then say :


NATION  WANTS  TO  KNOW  !



01    Oct  2017

  www.hemenparekh.in / blogs

   

  


    

Friday, 29 September 2017

What would happen ?



What would happen if Personal Income Tax was totally abolished ?



Before answering that question , let us refer to what Shri Jaitleyji told the Consultative Committee attached to the Finance Ministry , yesterday :



·         The number of tax payers rose to 6.26 crore in 2016-17 from 4.72 crore in 2012-13


·         The revenue collections in case of Direct Taxes rose to Rs 8.5 lakh*crore during 2016-17 at a growth rate of 14.5 %


·         1100 searches were made from Nov 9 2016 to Jan 10 , 2017 , resulting in seizure of Rs 610 crore including cash of Rs 513 crore


·         Undisclosed Income of Rs 5,400 crore was detected and about 400 cases referred to the Enforcement Directorate and the CBI for proper action


·         The government is committed to widen the tax base by encouraging and incentivizing the NEW TAX PAYERS




So , from this , one thing is obvious


Government will need to forego a revenue of Rs 8.5 lakh*crore if Personal Income Tax was abolished – something very measurable


Followed by a question :


In such an event , from where would the government find the money to finance all its Infrastructure Development projects ?


What may not be so obvious to the Policy Makers is that , such a BOLD / UN-ORTHODOX / OUT-OF-THE-BOX , step would set in motion a VIRTUOUS  CIRCLE , where following things will happen :




*   There will be no incentive for tax evasion / avoidance 

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


*   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


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



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


     

*   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 ) MUST 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




·        
Take away incentive to evade taxes , thereby stopping future generation
      of Black Money



*    Channel all existing Black Money ( locked up in assets , in India or
      abroad ) into the main stream of economy ( Infrastructure Building )


*    Enable current annual inflow of inward remittances from overseas
      Indians to go up from $ 70 Billion to $ 700 Billion


*    Through rapid development of Infrastructure , generate Self
      Employment for 12 million youth every year


*    Drastically reduce FDI requirement for rapid growth of economy


*    By cutting down on government outlay for Infrastructure , reduce govt
      borrowing from market and consequent debt servicing


*    Raise GDP to 10 % by 2018



Why  is  such a BOLD  step urgently required ?



Current tax regime ,


*   Punishes honest people


*   Penalizes wealth creation


*   Encourages creation of " Black Money "


*   Provides incentive for tax evasion


*   Diverts resources into unproductive assets such as cash/gold/land etc


*   Stops people from working harder / smarter


With this regime , people tend to ask :


*   Why should I work hard and earn more , if the more I earn the more I
      pay  ?


*   Why not evade paying taxes by hiding real income ?


*   How will I ever be able to buy that 1 room flat costing Rs 50 lakhs ? I
     need Rs 20 lakhs by way of black money to buy it ! Where do I get
     that ?


*   For every rupee that the government collects from me as tax , only 15
     paise come back to me in the form of civic amenities .


Dear  Policy Makers :


This is the SIMPLEST – EASIEST – CHEAPEST way to revive our ECONOMY , in a permanent manner , without ever needing any other stimulus


There is no stimulus greater than the Human Greed !


30  Sept  2017


Will this work ? Your Guess ?



Business Standard ( 30 Sept ) carries following news report :



“ I-T cracks down on black money stashed abroad


Indian assets of tax evaders can be attached & confiscated against undisclosed foreign income or assets


The Income Tax (I-T) department has decided on an aggressive plan under the black money law to nab tax evaders who have undisclosed income or stashed assets abroad. 


In an internal communication, the Central Board of Direct Taxes (CBDT) told I-T officials that the spotlight should be on criminal consequences of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.


In the guidelines, it clarified that the Act allowed attaching and confiscating black money holders’ Indian assets against their undisclosed foreign income or assets under the black money law. It also said these evaders could face separate prosecution under the Prevention of Money Laundering Act (PMLA). 


The move follows poor results in detecting undisclosed foreign assets and delay in concluding pending matters under the Black Money Act, which came into effect in 2015. According to the official data, only 52 cases have been identified so far. Of these, nine are from Mumbai alone.


I-T officials said there was a lack of clarity in the existing framework, which this week’s guidelines have explained. The internal communication specified that the tax department can attach and confiscate the “proceeds of crime” equivalent in value held within the country to recover dues.




What is your guess :  Will this unearth those “ hidden / undisclosed foreign assets “  ?



MY GUESS :  YES !  BUT IN ABOUT 30 YEARS  !



On the other hand , Government could get those holders of Undisclosed Foreign Assets to come forward and declare $ 1000 BILLION , within 3 MONTHS , if it would just “ COPY “ the Indonesian Method !



Unbelievable ? 


Believe it  !  Read :



·         Indonesia shows the Way

=======================================================

·         How to raise $ 500 Billion ?



·         Why  a  begging  bowl ?



·         Nibbling  on  crumbs  ?




30  Sept  2017