Arthakranti by Anil Bokil an CA from Aurangabad

Please spare some time and read this article, and also visit the websitewww.arthakranti.org.

Over the last several decades we have had a number of attempts to consider radical measures to revamp the tax structure with the aim of containing black (unaccounted) money and to give taxation a more equitable face, if not form. All have failed or not lived up to their promise up to now.

 

Among them:

1. Abolish all personal taxation. Make Excise and indeed all indirect taxes progressive.

2. Have a system to tax expenditure instead of income.

This attempt by Chartered Accountant Anil Bokil, must fall into the same category of instant solutions and that itself makes me suspicious. Among the things that it does not address:

1. If transactions below Rs 2000 are to be permitted in cash, what is to prevent everyone from treating every transaction above Rs 2000 as more than one transaction? To give just one example: My wife goes to buy herself a sari which, she is told, is worth Rs 2015/- Under the Bokil law she cannot pay for it in cash. She must pay for it either by cheque or by credit/debit card. What is to stop her paying Rs 20/- in cash and the remaining Rs 1995/- also in cash since now the price of it is below Rs 2000/-? How many billions of such transactions will take place all the time to circumvent the transaction tax?

2. The whole panacea does not take into account the huge unorganized sector. How are the transactions in this sector to be accounted for in the case of all those billions of transactions above Rs 2000? The Bokil panacea seems to have been created by those who live in the cities and are totally unaware of the realities of commerce or what goes for commerce in Kalahandi or Santhal Parganas. Or for that matter in all the Bimaru states,

3. And what about the billions more below Rs 2000. Remember, we are a large country and the villager understands the value of money just as well as his city cousin.

4. The reason for bringing out Rs 500 and Rs 1000 currency notes now has been the inflation. The falling purchasing power of the rupee makes for transactions at an increasingly faster speed to take place in the marketplace. The Rs 1000 note which was demonetized in 1978 has therefore had to be brought back. But that again is taking a different tack. How will demonetising currency notes of smaller denomination help?

5. If the number of transactions have to multiplied in proportion to the amount that is to be spent to avoid tax, this involves that much more effort. Will this not fuel inflation at a runaway best?

6. Since all taxes other than the transaction tax are supposed to be abolished, this will bring into the legitimate marketplace a large amount of spending money, now legal, which will add fire to the inflation.

7. The storm of paper that will result in the banking system will bring it to a grinding halt.

8. The entire monetised economy will come to a halt, with all transactions in cash above Rs 2000 being made illegal.