Only two days back , I wrote following blog ( and sent
it to Cabinet Ministers / MPs / MLAS etc ) , urging total abolition of Personal
Income Tax :
Then , on Sunday I came across a write up
( Times of India ) titled :
“ How voting for higher taxes can make us all
richer “
In an essay published in AEON
magazine , Associate Professor of Philosophy , at the Central European
University in Budapest , Philip
Goff says :
“
The biggest problem with zero or low taxes is that , by voting for them ,
common people allow the rich to hold on to a large share of their earnings, and
this has become a hurdle
for fair redistribution of wealth “
No doubt , abolishing Personal Income Tax would enable the RICH to become RICHER
But ,
WhatWould They Do [ with
the tax-money saved ? ]
Philip Goff may want to
read my following blog ( 03 May 2016 ) :
=================================
For the year 2012-13, Personal Income Tax paid by individuals is as follows :
-----------------------------------------------------------
( Number of Tax payers ) ( Total tax amount paid - Rs Crore )
-----------------------------------------------------------
(
3
)........
( 437 )....
Super Rich
( 5430
)........
( 8,907 ).... Rich
( 14
Lakh )........
( 253,656 ).... Middle Class
( 111 Lakh
)........ ( 23,000 ).... Neo Middle (
Minimum Slab )
( 162
Lakh ).........
( NIL )....
Poor ( Tax
Exempt )
----------------------------------------------------------------------------------
( Total = 287 Lakh
).........( 2.86 lakh*Crore )
----------------------------------------------------------------------------------
Now , I have repeatedly advocated
total abolition of Personal Income Tax
So , it would be natural to ask :
If these people did not have to pay personal income tax , then what
would they do with this ( Rs
2.86 lakh*crore ) tax amount saved ?
================================
MY
GUESS :
# 3 Super Rich
individuals
They might buy some more gold / ornaments / flats or take more holidays
abroad
Of course , the expenditure
for the purchase of flats and ornaments will help the economy
# 5430 Rich
persons
Some of them would also indulge in buying gold / flats
Many would buy
luxury cars / luxury goods ( Consumer Durables , like domestic appliances or
Consumables like expensive clothes / ornaments / purses etc )
All of this expenditure
will , no doubt , help the
economy grow and create more jobs
# 14 lakh
Middle Class persons
From the above data , it is obvious
that it is this Middle Class persons ( 14 lakhs ) , who bear the brunt of the Personal
Tax collection !
And , as Rajiv Gandhi once said , for
every rupee of tax that they pay , only 15 paise worth of " Civic Services
" ( infrastructure / drinking water / health-care etc ), returns to
them !
And , on top of everything , they
have no " Social
Security " of any kind !
So , I believe that they would invest the saved tax
money in bank fixed deposits / mutual funds / life insurance / Public
Provident Fund etc , to ensure a small - but steady - source of income after retirement
Now , if Rs 2
lakh*crore of this tax saving were to become " Bank Deposits
", it would enable these persons to raise their " Credit Rating /
Loan Repayment Capacity " and take out bigger loans for homes / cars etc
This would give a huge boost to our economy
!
That would also raise our Domestic Saving Rate , once again , above 30 %
That would also relieve some pressure on the Government to introduce a
forced " Pension
Regime "
And , if this group spends some more money in sending their girl-child
to better schools , they would be investing in a better future of their children - a highly
desirable type of expenditure !
And do not discount the long term social impact of investing for
retirement
In most middle class Indian families , parents today depend upon their
SONS , to look after them in their old age .
Male child is THE only retirement assurance for these people
When tax savings make it possible for them to become independent of
their male child , the desire to have a male child ( at the cost of aborting a
female child ) , will go down !
# 111 lakh , Neo - Middle
Class persons
They have just entered the minimum tax slab ( 10 % ? )
Without doubt , they would spend the saved tax money in buying items of daily NECESSITY
- food being the foremost ! May be some cheap clothes !
By being able to meet the Cost of Living a little better , these persons would be
able to live a dignified life - even if living in slum-like conditions !
Their tax-saving would just not be enough for
them to book a 250 sq ft flat !
And since there would be no Personal Income Tax to be paid, no one would want to hide any
income !
Every rupee of income would get accounted for in official banking channels
!
Other than small daily purchases , large CASH payments will
disappear !
Official payments ( through
electronic transfer / credit cards / mobile wallets etc ) will dramatically go
up !
Banks
will get huge amounts of deposits and be in
a position to engage in micro - lending !
P2P lending platforms will take off like a rocket ! Especially
those " RICH " and the " SUPER RICH " will now start
lending to Start Ups and Self Employed Entrepreneurs , through this P2P web
sites
I request Shri Arun Jaitleyji to
seriously consider my suggestion in the forthcoming Central Budget
I am confident that not a single Political Party
will oppose this , either in Lok Sabha or in Rajya Sabha
It will be a political "
Harakiri " for anyone to oppose !
-----------------------------------------------------------
02 Oct 2017
www.hemenparekh.in
/ blogs
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