All economic ills-final

All economic ills – one pill

 

TOP tax system

 

1. No Income tax / Income tax returns
2. No Sales tax / Vat
3. No  central Excise duty (except on soft drinks, cars and tobacco products)
4. No CENVAT
5. No Service tax
6. No capital gains tax
7. No tax Evasion
8. No Auditing required for Individuals / Businessmen
9. No Black Money
10. No Check Posts / Way Bills
11. No Fake Currency
12. No Corruption
13. No Extortions, ransoms
14. No Poverty
15. No Misappropriation of funds

 

Introduction

 

1. India, plagued by so many ills like poverty,  corruption, tax evasion black money, fake currency, misappropriation of funds, needs one powerful pill that can remove all these ills which have been eating into the vitals of our society since Independence, to transform it into world’s the most powerful economic nation.
2. This pill named as “ TOP tax system” (Transfer or purchase tax system)  has been devised to free India from all economic ills, without any side effects and make a truly functioning financial system transparent to every citizen and can be easily understood, followed and implemented.
3. Under this TOP tax system sales tax/VAT levied by the state governments and Income tax, Excise duties, Capital gains tax, Service tax and cenvat levied by central government on all goods, items and service need to be abolished.
4. Therefore all the check posts across the country need to be removed allowing free movement of industrial goods, items and agriculture produce from anywhere to anywhere in India thus benefitting crores of farmers, traders, industrialists and importantly consumers.
5. Excise duty on liquor and wine can be levied by the state governments.
6. Excise duty by the central government need to be levied only on soft drinks, tobacco products and cars.
7. Import duty / customs duty and corporation duty by the central government can be levied as of now.
8. Cenvat by the central government need to be removed

 

Implementation of TOP tax system

 

1. What is required for TOP tax system to be success fully implemented is the strong political will to build the basic infrastructure of providing banking service for every village and colony having a population of around 2000 with the help of private sector banks and institutions.
2. The central government should give a permanent account number (PAN) by using biometric method to every citizen of India and make mandatory for every citizen of India to have only one main savings account (MSA) with the same PAN in the bank situated at the village or colony where he lives in.  The PAN and MSA number should be one and same.
3. Every citizen of India should be allowed to open any number of sub savings accounts (SSA) as he wish in as many banks anywhere in India using PAN (MSA) number.
4. The main savings account (MSA) should be used for buying of shares, land for agriculture or industrial purpose, plots, flats, gold, jewellery, commercial establishments or any other property.  Main savings account is also needed to get driving licence, passport, voting right, subsidies, monthly ration, CCTs and personal loans, industrial loans.
5. The sub savings accounts (SSA) can be used for running business, industry, cash transfers while buying or selling, schools, colleges, hospitals, studios, services, or any other type of business.
6. After establishing sufficient number of banks by the government with the help of private sector banks and financial institutions all the citizens of India need to be asked to deposit all the currency notes of 1000, 500, 100 and 50 rupees except 20 and 10 rupee notes, available with them in these banks within a stipulated time of 30 days.
7. After this grace period of 30 days, the government need to abolish all notes of denomination 1000, 500,100 and 50 rupee notes except 20 and 10 rupee notes.
8. From then on the TOP tax system becomes operational. Every person is entitled to withdraw maximum of rupees 5,000 per month from the main savings account only.  Thus a family of two can avail cash of 10,000 rupees maximum per month mainly to buy daily necessities like vegetables, milk groceries, and other small items.
9. Every time a person buys items/goods properly or avails service he needs to transfer the required amount through cheque, debit card, cash card, net banking.
10. For every transfer of amount, a 4% transfer or purchase tax (TOP Tax) will be automatically deducted from his account.  This 4% tax amount on every transaction from all banks in a particular state will go to the combined pool account of sate and central government in that particular state capital.  30% of this amount from every state pool account will go to central government pool account.  The remaining 70% will be retained by the respective state governments.
11. In addition to the TOP tax, a profit tax (PT) should be levied once a year on 31 march on the minimum amount recorded in the financial year of every (SSA) account of the citizen. This profit tax (PT) is an account basic.  In the case of main saving account the profit tax (PT) will be levied on the minimum amount recorded in the financial year only if it crosses the limit of Rs. 3,00,000
12. The profit tax in the next financial year will be levied on the minimum balance of that year minus the previous year’s taxed amount ignoring the maximum amount however huge may be.
13. Whenever a person migrates or moves to a new place his old address in main saving  account (MSA) should be changed with the new address to get monthly ration, subsidies available in the place and to get voting right in that particular constituency.

 

 

 

Example1:

 

Table 1,  One of the Subsavings accounts (SSA) of a person

 

Year	Minimum balance	Maximum balance	Profit Tax (PT)
2007-08	10,000	50,00,000	30% of 10,000                = 3,000
2008-09	40,000	70,00,000	30% of (40,000 – 10,000) = 9,000
2009-10	90,000	1,80,00,000	30% of (90,000 – 40,000) = 15,000
20010-11	20,000	2,00,00,000	Nil
2011-12	1,50,000	5,00,000	30% of (1,50,000 – 90,000) = 18,000
2012-13	1,50,000	10,00,000	Nil
20013-14	2,00,000	80,00,000	30% of (2,00,000 - 1,50,000) = 15,000
2014-15	1,00,00,000	2,00,00,000	30% of (1,00,00,000 - 2,00,000) = 29,40,000
2015-16	80,00,000	3,00,00,000	Nil

 

 

Table 2  Main savings account (MSA)

 

Year	Minimum balance	Maximum balance	Profit Tax (PT)
2007-08	2,99,000	50,00,000	Nil
2008-09	3,00,000	70,00,000	30% of 3,00,000 = 90,000
2009-10	4,00,000	4,50,000	30% of 1,00,000 = 30,000
20010-11	2,00,000	8,00,000	Nil
2011-12	4,50,000	5,00,000	30% of 50,000 = 15,000
2012-13	4,50,000	10,00,000	Nil
20013-14	6,00,000	80,00,000	30% of 1,50,000 = 45,000

 

 

Part-1 Estimation of revenue under TOP tax system in crores

 

Estimation of tax revenues under TOP tax systems:

As each item / service will be transacted

Three times (User, Dealer and Manufacturer / Service provider), the net value of the TOP tax will be 12% (4% x 3) of GDP

 

GDP Budget estimate for year 2008 - 09 is 53,03,770 Crores

 

1. We get TOP Tax from G.D.P  = 12% of 53,03,770                                           =               6,36,450
2. Estimated Profit tax on min. balance of all (SSA/MSA) accounts                        =                  70,000
3. Estimated Corporation tax for year 2008-09                                                      =              1,92,680
4. Estimated Import duties for year 2008-09                                                          =               1,15,000

 

Total tax revenue under proposed TOP tax system                                               =              10,14,130

 

 

 

 

 

 

Part-2 Estimation of revenue under present system

 

2008- 2009 Budget estimates of direct and indirect taxes of state and central government in crores.

 

States Direct tax                                                                                                                =                 42,744

State Indirect tax                                                                                                               =              2,86,178

Central Direct tax                                                                                                              =              3,65,000

Centres indirect tax                                                                                                            =              3,22,715

 

Total Tax Revenue                                                                                                             =            10,16,637

 

Part-3 Estimation under TOP tax system under GDP in crores

 

The estimated TOP tax from G.D.P of 53,03,770 will be 4% x3

(User, dealer, manufacturer) i.e. 12% of  53,03,770                                                          =             6,36,450

Estimated Profit tax under proposed TOP tax system                                                        =                70,000

Total tax revenue under proposed TOP tax system                                                           =              7,06,450

 

Estimated States revenue under TOP tax system is 70% of 7,06,450                                =              4,94,515

Estimated Central share under TOP tax system is 30% of 7,06,450                                  =              2,11,935

Estimated Corporation tax for year 2008-09                                                                    =              1,92,680

Estimated Import duty              for year 2008-09                                                             =              1,15,000

                                                       

Total Revenue (Central + State)                                                                                       =            10,14,130

                                         

1. From the estimation part 1&2 it is understood that there is no much difference between the tax revenues under the TOP tax system and the present complicated, cumbersome tax system.
2. Tax revenues from the TOP tax system obtained even without Income tax, Central excise duty and state excise duties on liquor and wine.
3. Under the TOP tax system people will benefit immensely as they no longer need to bother about income tax returns.  Trader and individual industry owners need not maintain sales bills, stock lists, Audit books and way bills.

 

By taking into account the unaccounted G.D.P of India the actual G.D.P would have been 90,00,000 crores.  The TOP tax from 90,00,000 crores assumed G.D.P would be

 

4% x 3 = 12% of 90,00,000 crores.                                           =           10,80,000 crores

Profit tax                                                                                    =                70,000 crores

Estimated Corporation tax for year 2008-09                              =              1,92,680 crores

Estimated Import duties year 2008-09                                       =              1,15,000 crores

 

The Estimated total Revenues under

Proposed TOP tax system will be                                            =          14,57,680 crores

 

States share will be 70% of 11,50,000                                   =              8,05,000 crores

 

Central government share will be 30% of 11,50,000               =                3,45,000 crores

Central corporation tax                                                          =                 1,92,680  crores

Import duties                                                                         =                 1,15,000  crores

Total central revenues                                                            =                 6,52,680  crores

 

Advantages of TOP tax system

 

1. There is an estimated currency of 5,90,000 crores in the country and with the adoption of the TOP tax system, all banks will have sufficient funds to lend.  So the interest rates need to be removed on all savings and fixed deposits except in the following case

 

All the senior citizens above the age of 60 years, physically challenged, visually impaired, orphans, widows should be given 12 % interest per annum on the deposits upto the limit of 5 lakhs only in the main savings account M.S.A.

 

2. Prime Lending Rates

1. A maximum of 2 % simple interest per annum should be levied on all loans upto 10 lakhs (taken for agriculture, education, small scale industries, vehicles, house, flats, plots, or any other purpose.
2. Maximum of 4% simple interest per annum should be levied on all loans more than 10 lakhs (taken for agriculture, industry, business, vehicles, flat, lot or any other purpose)
3. Actual interest rates are shown in the following table as ‘TOP tax’ will be deduced from SSA/MSA while repaying the loans.

 

3. The private lenders who have been exacting heavy interest rates per annum are forced to reduce their interest rate under the TOP tax system for the following reason.
1. The bank PLR rates will be 2% per annum upto 10 lakhs and 4% per annum over 10 lakhs any money lending by banks will be faster and smoother.
2. Formers to take crop loans for khariff or rabi upto 10 lakhs should be allowed to pay interest only at the end of the year to renew their loans in order to avoid TOP tax.
3. Loan takers will have the option of repaying their loans from the source of their income to bankers or money lenders for sake of avoiding TOP tax.
4. Getting loans from banks will be much easier faster and smoother. Customers need not produce documents, E.C’s, legal opinions etc., for obtaining loans. Depending upon the loan amount, the bank managers need to put the appropriate asset among the customer’s property holding in his main savings account (MSA) under mortgage and sanctions the loan with out any delay.
5. As interest rates are very low at 4%, the industrial products will be cheaper and competitive in inter national markets. So the exports will be increased substantially thereby decreasing the wide gap in the balance of payments.

 

4. The main savings account (MSA) can be operated from any bank and any where in India.  All the details of a persons occupation, educational qualifications, marriage, driving license , passport, his/her life partners name, pan number (MSA) (and vice versa) children and their age etc.  Once the child gets the age of 15 years he/she will get PAN and MSA.

 

5. This system totally and permanently checks the ever increasing problem of illegal migration from Pakistan and Bangladesh changing the demographic proportion of India to an unimaginable level.

 

6. It is much easier for the government to determine below poverty line families to give them monthly ration, old age pensions, widow pensions, pensions for physically handicapped, orphans and pension for visually impaired.

 

7. Under the TOP tax system, lands, plots, flats or other properties purchased should be made through main savings account only.  If any person buys land, plot, flat or any other property anywhere in India the extent and nature of the property will be credited in his main savings account. If he sells the property that is credited in his MSA and the same will be debited from his main savings account. Just like shares there will be no paper documents for properties. Unlike cash transfers the buyer’s signature is also needed for the transaction.

 

8. Under the TOP tax system there will be no benami land holding and a person cannot hold more that 20 acres of land for agriculture purpose. The land ceiling act can be implemented in totality to perfection making Government’s task easier in pushing forward land reforms and allocating land to landless poor. If an individual or company acquires land more than 20 acres for industry, studios, real estate or any other purpose, land tax of   10,000 per acre per annum need to be levied. If land is acquired for SEZs the formers should be paid not only the market price of the land but also Rs 1,000 per acre per month for rest of his life and there after to his/her legal heir. It is easier for local panchayats, municipalities, corporation to collect house tax, vacant plot tax and properties tax as all the details of a person’s properties are recorded in his main savings account (MSA).

 

9. The registration charges for purchasing property land, plot, flat, house or other commercial establishments be same and equal all over India irrespective of the place and market value of property.  It is needless to mention that if a person buys a property (land, plot, flat, house, commercial establishment) for 10 lakhs, a TOP tax of 40,000 will be deducted from his MSA of SSA while transferring the cash to the sellers account.  If he buys the same property for 1 crore the deducted TOP tax will be 4 lakhs.  In the case a person transfers a property as a gift to his/her son, daughter or any other person the TOP tax deducted will be nil as there is no cash transfer made.

 

10. The 5 crore least income families(20 crore people) based upon Main savings accounts (MSA) should be given Rupees 1000 per month by cash transfers directly into their main savings account on the following condition
1. They need to send their children to schools
2. They need to attend adult classes at night

 

11. The most noteworthy usage of the TOP tax system is preparation of electoral rolls for general election, State election and local body elections.  Under the present system the preparation of electoral rolls is cumbersome and time consuming process taking upto 6 months and yet the final list will be always defective with complaints galore from the electorate who do not find their names in the voters list on the poling day.  Under the TOP tax system MSA accounts lists in the banks are virtually the electoral Lists and will be available the same day the election notification is released.  So there is no question of non inclusion of any citizen in the voter list and there will be no bogus voting.

 

12. But in the case of any by-election the voters list (MSA list) of the last general election or state election, which occurred last, need to be taken because political parties may encourage their followers from other constituencies to change their local addresses in their main savings accounts (MSA) with new addresses where the by-elections will be held.

 

13. By using this system, government machinery can be fine-tuned to ensure accountability, efficient weeding out of wasteful expenditure and constant monitoring.  All leakages in the transit of funds from government to end user will be plugged to get the desired results.  The government can improve the lot of poor by launching the Conditional transfer (CCTs) Programme that has been found successful in some Latin American and Caribbean countries.  CCTs reduce child labour and give boost to an individual’s capacity to spend and thereby reducing migration from villages to cities already bursting at their seams.  As the TOP tax system provides every citizen the mandatory main Savings account (MSA) the CCT programme will be more successful in India than in Latin American and Caribbean countries.  The Central government must shed its lethargy, policy vacillations and indecision to provide the necessary infrastructure for economic development and redistribution to alleviate poverty.

 

14. The TOP tax system gives a big boost to stock markets as people start buying huge lots of shares to maintain minimum balance in their accounts in order to avoid profit tax.  There will be no significant effect of TOP tax system on intra day trading and Future options trading because the looser looses extra 4% of the loss amount in the intraday trading. People will prefer to buy shares on the long term and annual yield basis.  They invest in the companies which gives handsome dividends year after year.

 

15. Traders, businessmen, individuals( own industries) dealers will no longer need to maintain account books, stock lists, sales lists, purchase bills etc.

 

 

 

 

 

 

 

 

 

 

Some of the facts, figures and statements in the above article are purely born out of my imagination and may not necessarily be true or practicable. Excuse me for any grammar and spelling mistakes that have been inadvertently entered.

 

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