The Firm

Show Timings:

Friday: 10.30 pm, Saturday: 11.30 am

Sunday: 9:30am & 11.00pm


One Tax To End All Tax

Published on Mon, Feb 03,2014 | 17:08, Updated at Mon, Feb 03 at 17:08Source : 

By: Girish Vanvari, Co-head of Tax, KPMG India

‘One tax to end all tax’ – a proposal that has sparked immense debate and discussion on the viability of abolishing all taxes and having a single expenditure or transaction tax such as a Banking Transactions Tax (BTT). Many nations like Australia, Argentina and Brazil have experimented with BTT in the past, but had to eventually abolish it after a temporary short term revenue boost. India too imposed a banking cash transaction tax from 2005 but withdrew it in 2009.

Any proposal for a single tax levy should be based on a detailed road map founded on analysis of rational numbers, empirical data and projections. For instance, the collection from personal tax sources was estimated at INR 2,47,000 crores for the FY 2013-14. Hence, any proposal to abolish this tax will need to be supported by additional source of revenue to the Central Government of not less than the loss on account of foregoing this revenue. One has to further engage in a cost benefit analysis as to whether removal of personal income tax (which could mainly benefit approximately 35-40 million people out of a population of 1.2 billion) would yield benefits for the economy and help tackle pertinent issues/ problems like curbing black economy, reduction in income inequality, simplicity of administration, check on corruption, etc.

Also, abolishing all taxes and imposing a single BTT would disconcert the federal structure of our democracy. BTT may diminish the banking culture and promote a parallel economy, specially, considering that only approximately 17-20 percent of people have access to banking facility in India. Various concerns arising from the single tax levy such as violation of the principle of equity, loss of exemption to the agriculture sector, cascading effect of tax on transactions, taxes on alcohol, cigarettes etc. will need to be duly addressed. It seems that India still has a long way to evolve to be prepared to live this utopian vision. In the immediate future though, this idea seems impractical to aspire, implement and achieve – this seems seconded by the retraction of this idea in the political circles. Source based taxation exists today in forms such as Security transaction tax, real estate transactions etc. The need of the hour is to focus on the simplification, rationalization and effective implementation of the current tax system to widen the tax net and improve compliance. There should be time bound assessments and resolutions and discretion in the hands of the tax officers should be minimized. Retrospective amendments should be refrained from to boost the confidence of foreign investors and lend credibility, stability and predictability to the tax system. Expeditious and effective implementation of the long drawn tax reforms such as DTC & GST should be considered.


Copyright © Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of is prohibited.