week 8-14 Feb:
• The proposal from a Pune-based tax research outfit, Arthakranti, advocates replacing the present income tax and over 30 local, State and Central taxes with a single 2 per cent levy per receipt in bank accounts and recommends that just import duties be retained from the present system.
• While the government is pitching for quick passage of the Constitution (122nd Amendment) Bill for the rollout of the Goods and Services Tax, Arthakranti’s proposal envisages a system that does not tax consumption or income, as is the case now, but the “velocity of money”.
• It was clarified by the official who made the presentation that the ‘ground-breaking’ tax reform proposal is not for the consideration of the upcoming budget.
• The “innovative” proposal was aimed at reducing corruption and eliminating the cost of compliance for taxpayers.
• Even in the U.S., a senator from Hawaii has introduced a private member Bill on a similar concept.
• The outfit has estimated that the levy it is proposing can be collected through the banking channel rather than the tax collection authorities.
• Without leading to a loss of revenue, it will plug tax evasion and avoidance.
• This is not the first time such a proposal has been received by the Centre. Several governments have earlier discussed plans to abolish income tax but rejected them.
• However, the group of Secretaries are unlikely to recommend that Arthakranti’s proposal be forwarded to the Ministry of Finance.