Is it practical to abolish Income Tax (In India or any other developing nation)?

[karthikc]

Ok, so I am not talking about the Gulf countries, Brunei, Cayman Islands or Bermuda.

Many pro-free market economists and economic think tanks in India have proposed this radical reform of doing away with Income Tax.

Obviously the question arises, if no income tax then how does the government make up for this lost revenue. The ideas which are floated around are as below:

1. Auction of 2g, 3g, 4g spectrum
2. Auction of coal
3. Bank Transaction tax (basically tax the withdrawl/deposit made by bank account holders)...and so many others

How feasible/effective are these? I believe, the biggest challenge is to first ensure that all transactions are first recorded. That even includes the basic qualification of all people to have a bank account. But say that is achieved , is it still a crazy idea?

And if it is feasible, how come none of the developed countries have even tried this approach?

Would be great to know thoughts of people in this forum..

 

[CricketCartoons]

I think this is a dream of the middle class. Income tax must stay, but public spending must be transparent. Luxury goods must be taxed 100%.

 

[GBK_Fan]

Taxing bank withdrawals is a brain dead idea. The general suggestion is to enforce indirect tax avenues like VAT or GST. The problem with this approach is enforcement with the amount of small shops which do not support card transactions, tracking money is difficult. It's not as simple as it sounds and hence has not been tried yet. If you are linking it to Trumps tax plan, that's different. He is reducing the rates, not eliminating them and hoping that he will get some growth rate boost with that. It's a brave attempt and will definitely increase the fiscal deficit. Whether he gets the same results as he expects, the jury is still out

 

[karthikc]

Taxing bank withdrawals is a brain dead idea. The general suggestion is to enforce indirect tax avenues like VAT or GST. The problem with this approach is enforcement with the amount of small shops which do not support card transactions, tracking money is difficult. It's not as simple as it sounds and hence has not been tried yet. If you are linking it to Trumps tax plan, that's different. He is reducing the rates, not eliminating them and hoping that he will get some growth rate boost with that. It's a brave attempt and will definitely increase the fiscal deficit. Whether he gets the same results as he expects, the jury is still out

Also the proponents of this idea tell that abolishing income tax will stop black money creation to a large extent. But if it is replaced by BTT, I don't see how people will stop evading that and not hoard cash.

 

[GBK_Fan]

Also the proponents of this idea tell that abolishing income tax will stop black money creation to a large extent. But if it is replaced by BTT, I don't see how people will stop evading that and not hoard cash.

Yeah. Even if you look at low tax jurisdictions like Singapore and Hong Kong, you will see a huge difference in the living standards of the natives and the migrants. Not too mention that companies will move away when the tax benefits stop. Case in point Singapore which has seen a lot of companies move to Hong Kong and pune

 

[Yossarian]

Ok, so I am not talking about the Gulf countries, Brunei, Cayman Islands or Bermuda.

Many pro-free market economists and economic think tanks in India have proposed this radical reform of doing away with Income Tax.

Obviously the question arises, if no income tax then how does the government make up for this lost revenue. The ideas which are floated around are as below:

1. Auction of 2g, 3g, 4g spectrum
2. Auction of coal
3. Bank Transaction tax (basically tax the withdrawl/deposit made by bank account holders)...and so many others

How feasible/effective are these? I believe, the biggest challenge is to first ensure that all transactions are first recorded. That even includes the basic qualification of all people to have a bank account. But say that is achieved , is it still a crazy idea?

And if it is feasible, how come none of the developed countries have even tried this approach?

Would be great to know thoughts of people in this forum..

You can only auction off the coal industry and the 2g/3g/4g spectrum once. And once you've auctioned off everything auctionable, what then? How do you keep generating government revenue year after year?

 

[CanadianG00se]

Ok, so I am not talking about the Gulf countries, Brunei, Cayman Islands or Bermuda.

Many pro-free market economists and economic think tanks in India have proposed this radical reform of doing away with Income Tax.

Obviously the question arises, if no income tax then how does the government make up for this lost revenue. The ideas which are floated around are as below:

1. Auction of 2g, 3g, 4g spectrum
2. Auction of coal
3. Bank Transaction tax (basically tax the withdrawl/deposit made by bank account holders)...and so many others

How feasible/effective are these? I believe, the biggest challenge is to first ensure that all transactions are first recorded. That even includes the basic qualification of all people to have a bank account. But say that is achieved , is it still a crazy idea?

And if it is feasible, how come none of the developed countries have even tried this approach?

Would be great to know thoughts of people in this forum..

This will kill the Bank sector in India. All the hardwork done by Modi Govt to move working class to use Bank account. General public will avoid using Plastic in order to evade getting taxed for every transactions.

No offence to you but your argument for making Tax free is absolute suicidal for any economy and will undo the growth India had in last 20 years in matter of 2 years. Glad people holding office dont think like you. Tax is absolute must for country like India, unlike Arabs we do not have oil to recover tax money. If anything Govt should work to bring every working class under tax bracket.

 

[CanadianG00se]

You can only auction off the coal industry and the 2g/3g/4g spectrum once. And once you've auctioned off everything auctionable, what then? How do you keep generating government revenue year after year?

Pretty much this!!

Where would govt raise revenue for public sector. Govt will left no revenue and govt employees will be made to work free.

OP had no provided one working solution as to how Govt will generate revenue for missint out on Tax. His suggestion for charging tax for bank transaction is laughable and impractical.

 

[big_gamer007]

Problem is that only a little person of the population pays taxes if everyone pays honest taxes government will have enough money and if government is honest after a couple of years tax slabs will automatically decrease.. Too much hypotheticals involved here but in the end nothing is going to change we are selfish and greedy people at all levels from bottom to top most..