Recent news and rumors suggest that the current demonetization done is in line with the Artha Kranti proposal and would lead to a Cashless economy.
Can this really be achieved in India? The last I read was that in India only about 10 percent of money transactions is done cashless. First we have to look at the Artha Kranti proposal.
The main points in the Artha Kranti proposal:
- Replace all Taxes with Bank Transaction Tax (BTT) -- The proposal states to remove Income Tax and all other taxes and replace this with a compulsory tax for all people in the way of BTT. The only tax they propose to be kept is the Customs/Import Duty. The BTT they propose is 2%.
The BTT will happen at the receivers end. So, when a salaries employee receives her pay she would get a BTT removed amount, like the current TDS for taxable employees. The BTT proposed is 2%. So, there would be no tax slabs and all people will be kind of paying a tax.
Also, whenever you go out and buy something, the BTT will be cut on the receiver's end. For example, you go and buy a mobile phone, the company that sells the mobile phone will get the sale price minus the BTT.
Hmm, isn't this already the case. All taxable employees get their salary after the deduction of TDS. And, nearly all goods are taxed with Service Tax and other taxes. So, what is different?
The difference lies in the next proposal.
- Withdrawal of Currency and Limit on Cash Transactions -- The proposal wants to withdraw all currency above INR 50 and place a limit on cash transactions at INR 2000.
This will bring all transactions under BTT. Payments to the vegetable vendor, the milk man, local grocery store, medicines, masonry work, carpenters, household repair works, sweets shop, building material (like marbles, plywood, etc), hardware stores, agriculture equipment, packers movers, and many more will be included in BTT. These are just a few examples of services which are done using Cash, will now be required to go through the Banking system and BTT.
Currently there are around 100 services already taxed under Service Tax which is at 15%. Would BTT remove Service Tax?
What about the Cess that the Central Government levies?
What about Transparency?
There is no mention of Transparency in the Proposal. What the proposers think is that if the BTT is collected, the works would happen magically and India would become "Sone kii Chidiya" (My opinion).
Even in the current system, the Tax is collected and for example roads are made. And, according to many news sources, such roads are just made on paper and no actual work is ever done. What guarantee is there that the work is going to be actually performed by implementing BTT?
Also, talking about the Cess, the Central Government had started to take the Swach Bharat Cess. In a recent news (or some RTI reply, I forgot what the news topic was) what came up was that there is no information on how the funds are being used.
Parallel Economy
These words are being used like there are two countries in India. They say that cash does not attract Tax. But, whenever someone uses Cash, the Cash is taxed indirectly in the form of Service Tax, etc.
Also, from the proposal, the requirements for payment gateways becomes important. And such payment gateways like the online wallets will see a huge market. What about the money that is stored in these online wallets. Is this money which will be lying unused be taxed by the Government or would these wallets be free to use such money for their own purposes. Will these wallets share their additional income with the people. Would these online wallets not be the Parallel Economy?
Living on Coupons
The side effect of such Parallel Economy like online wallets is discount coupons. We would be living in a age of searching for coupons. And this will be used by the big corporates for their crony capitalist ideas.
Online Frauds / Hacking / Cracking
Our online money will be seriously exposed to online fraud. A recent news said that some 30 lakh bank cards were compromised. What will happen if all our money is concentrated in just one place? We will all be beggars in a second if a large scale online fraud happens.
Specially Indian Government websites lack even basic security. This was exposed by some school going child according to a recent news. The child was able to hack into a government website and leak its details even without the use of sophisticated means.
In conclusion, I would like to minimize my Income Tax :) But with only bits and bytes as our currency, security will be even greater concern.
Can this really be achieved in India? The last I read was that in India only about 10 percent of money transactions is done cashless. First we have to look at the Artha Kranti proposal.
The main points in the Artha Kranti proposal:
- Replace all Taxes with Bank Transaction Tax (BTT) -- The proposal states to remove Income Tax and all other taxes and replace this with a compulsory tax for all people in the way of BTT. The only tax they propose to be kept is the Customs/Import Duty. The BTT they propose is 2%.
The BTT will happen at the receivers end. So, when a salaries employee receives her pay she would get a BTT removed amount, like the current TDS for taxable employees. The BTT proposed is 2%. So, there would be no tax slabs and all people will be kind of paying a tax.
Also, whenever you go out and buy something, the BTT will be cut on the receiver's end. For example, you go and buy a mobile phone, the company that sells the mobile phone will get the sale price minus the BTT.
Hmm, isn't this already the case. All taxable employees get their salary after the deduction of TDS. And, nearly all goods are taxed with Service Tax and other taxes. So, what is different?
The difference lies in the next proposal.
- Withdrawal of Currency and Limit on Cash Transactions -- The proposal wants to withdraw all currency above INR 50 and place a limit on cash transactions at INR 2000.
This will bring all transactions under BTT. Payments to the vegetable vendor, the milk man, local grocery store, medicines, masonry work, carpenters, household repair works, sweets shop, building material (like marbles, plywood, etc), hardware stores, agriculture equipment, packers movers, and many more will be included in BTT. These are just a few examples of services which are done using Cash, will now be required to go through the Banking system and BTT.
Currently there are around 100 services already taxed under Service Tax which is at 15%. Would BTT remove Service Tax?
What about the Cess that the Central Government levies?
What about Transparency?
There is no mention of Transparency in the Proposal. What the proposers think is that if the BTT is collected, the works would happen magically and India would become "Sone kii Chidiya" (My opinion).
Even in the current system, the Tax is collected and for example roads are made. And, according to many news sources, such roads are just made on paper and no actual work is ever done. What guarantee is there that the work is going to be actually performed by implementing BTT?
Also, talking about the Cess, the Central Government had started to take the Swach Bharat Cess. In a recent news (or some RTI reply, I forgot what the news topic was) what came up was that there is no information on how the funds are being used.
Parallel Economy
These words are being used like there are two countries in India. They say that cash does not attract Tax. But, whenever someone uses Cash, the Cash is taxed indirectly in the form of Service Tax, etc.
Also, from the proposal, the requirements for payment gateways becomes important. And such payment gateways like the online wallets will see a huge market. What about the money that is stored in these online wallets. Is this money which will be lying unused be taxed by the Government or would these wallets be free to use such money for their own purposes. Will these wallets share their additional income with the people. Would these online wallets not be the Parallel Economy?
Living on Coupons
The side effect of such Parallel Economy like online wallets is discount coupons. We would be living in a age of searching for coupons. And this will be used by the big corporates for their crony capitalist ideas.
Online Frauds / Hacking / Cracking
Our online money will be seriously exposed to online fraud. A recent news said that some 30 lakh bank cards were compromised. What will happen if all our money is concentrated in just one place? We will all be beggars in a second if a large scale online fraud happens.
Specially Indian Government websites lack even basic security. This was exposed by some school going child according to a recent news. The child was able to hack into a government website and leak its details even without the use of sophisticated means.
In conclusion, I would like to minimize my Income Tax :) But with only bits and bytes as our currency, security will be even greater concern.
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