It is heartening to observe that despite the slowdown of the economy for more than 9 months on account of Covid pandemic and its related adversaries affecting all economic activities the capital market has attracted fresh investments and by and large all IPOs have been a grand success with several times oversubscription. The capital market is booming and the average per day turnover in the markets has been reportedly in the range of about Rs Rs 80000 crores. With the improved performance of real estate business and some of the commodity markets, the revenue earning potential of the Government through Capital gains, Security Transaction tax and other levies has substantially gone up and by nature these revenues are non inflationary in character helping the economy and people a lot. It would be ideal in this background to think of streamlining the mode of Capital Gains Tax and make it totally independent of Income tax. As it is, there is lot of hue and cry to abolish the Income tax as the collections of taxes and the costs and hassles involved in collecting the taxes do not favour continuance of this tax. Delinking of capital gains tax from Income tax not only bring lot of relief to the tax administration but also would help income tax payers particularly salaried class and pensioners who generally keep away from capital market and speculative investments. All capital gains tax, dividend tax, and Security Transaction tax can be preferably collected at source instantly using the technology optimally and doing away with filing of returns if desired. Just like general customers paying GST not filing Returns, the capital market investors in particular can be free of filing of returns as the taxes get collected instantly and there is no need to have a further follow up wasting national resources. Simplicity in both tax collections and tax compliance get accomplished simultaneously.
Similarly, If bank transaction tax is introduced, even the very income tax can be abolished and the Government can make the transaction tax system more dynamic in such a way that the possible loss on account of income tax abolition can be made good by having different rates of transaction tax for bank account holders based on their deposits and other parameters of Credit card operations and like that. Any credit transaction including salary and other credit of any kind can have a higher transaction tax in lieu of income tax .This can be different compared to the rate applicable to debit transactions.
The objective of meeting revenue targets and compliance of tax payments of different tax levies can be met by reforming the modes of tax collections without filing of returns and ensuring ease of doing business and living as well .Both the Government and Tax payers stand to benefit by detaching capital gains tax from Income tax and introducing bank transaction tax .Use of technology and the readiness to change the modes of tax collection matter a lot to augment tax resources, tax simplification, tax compliance and minimise tax evasion.
Dr T V Gopalakrishnan
2 comments:
Very well said. I think Income Tax administration is costlier than the revenue it generates as the salary component will hike at every decade in form of wage revision. Some alternative tax can be thought of where there is no separate administrative costs involved. A very good article Sir. Thanks.
Transaction tax can replace income tax.
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