Synopsis of ArthaKranti Proposal

Transcription

1 Synopsis of ArthaKranti Proposal Contents 1. Current Reality, Related Facts and Figures 2. ArthaKranti Proposal 3. Productivity of the ArthaKranti Proposal 4. Effects of the ArthaKranti Proposal

2 Current Reality, Related Facts and Figures Listed below are some of the issues we commonly face directly or indirectly. Also listed are some underlying causes: Poor Infrastructure Ever Widening Economic Disparity The have-nots, for the sake of survival are forced into illegal activities. The desperation serves as an ideal fuel for the fires of crime, terrorism, naxalism, and all kinds of socially divisive activities. This in turn leads to an increasingly difficult law and order situation. Social Insecurity Loss of Faith in Police and Judiciary Thriving Parallel Economy fuelled by Black Money Rampant Corruption Over-Populated Cities and Abandoned Villages Consistent and huge Fiscal Deficit at the Centre and in all States Little or no funds for any real development programs or to address even the subsistence needs of the have-nots In the Indian economy, cash transactions far outweigh transactions through the banking system as much of 80 % of the economy is cash based leading to an Unhealthy Development of the Banking System, the backbone of any modern day economy. Alarmingly enough, with every passing year, this percentage of Cash Transactions is growing rather than shrinking! Natural effect is scarcity of Credit Supply for one and all. The have-nots remain outside the banking system and never get a chance to establish their credibility. This keeps them at the mercy of the Cash Economy / Parallel Economy. The Political System, due to lack of Government Funding (White Money Funding), is at the mercy of the Parallel Economy and Black Money. This inevitably leads to increased criminalization & corruption in politics.

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4 Irrationally High Denomination The table below highlights the disparity between India and some other World Economies as regards ratio of Per Capita Income to Highest Denomination. Country Per Capita Highest Income [A] Denomination [B] A B USA $ 53,000 $ UK 25, Japan 50,00,000 10, India Rs. 90,000 Rs. 1, Irrational Distribution of the Irrationally High Denomination Proportion of Highest Denominations in Total Currency Money and their Cost of Printing explain common occurrence of Fake Currency in abundance (~ 28 % by value, of total currency money).

5 Comparison of Currency Denomination Distribution: Indian Rupee & U. S. Dollar Note: Highest Denomination in U. S. is $ 100. Also, considerable part of U. S. Currency in $ 100 and $ 50 Notes is in use outside USA, it being an International Currency. Bank Money, Currency Money and their Ratio in Different Countries: Country Unit Currency Money (A) Transaction Money Bank Money OR Demand Deposits (Withdrawable by cheque) (B) M1 (A + B) Bank Money Currency Money (B A) Australia Billion Australian $ China Trillion Yuan Japan Trillion Yen South Korea Trillion Won New Billion New Zealand Zealand $ Singapore Billion Singapore $ EURO AREA Billion Euros 1,070 5,940 7, UK Billion 73 1,547 1, USA Billion US $ 1,400 1,930 3, India Billion Indian Rupees 16,600 10,000 26,

6 Thus, to summarise, as depicted and described above, Current Reality is nothing but the effect of the following System Level Technical Flaws: Flawed and Failed Taxation System Irrationally High Denomination and its Irrational Distribution and Underdeveloped Banking System Solution in the form of the ArthaKranti Proposal Withdrawal of existing Taxation System Completely* (except Customs/Import Duties) * All Central, State and Local Government Taxes Direct as well as Indirect Every Transaction routed through a bank will attract a certain deduction in appropriate percentage (say 2 %) as a Bank Transaction Tax [BTT][A Single Point Tax Deducted at Source] o This deduction is to be effected on receiving/credit account only o This deducted amount will be credited to different Government levels like Central, State and Local (as say, 0.7 %, 0.6 % and 0.35 % respectively) o Transacting Bank will also have a share (say 0.35 %) in the deducted amount as the bank has a key role to perform Cash Transactions will not attract any tax Withdrawal of High Denomination Currency (say above Rs. 50) Government should make legal provisions to restrict Cash Transactions up to a certain limit (say Rs. 2,000) This means, Cash Transactions above this limit will not enjoy any legal protection.

7 Productivity of the ArthaKranti Proposal As per Budgetary Estimates, Combined Total Tax Revenue of the Central and All the State Governments = ~ Rs. 20,00,000 Crores *1 Considering the Total Tax Revenue of all the Local Governments like Municipal Corporations to be ~ Rs. 90,000 Crores, the Combined Total Tax Revenue of the Central, State and Local Governments = Rs. 20,00,000 Crores + Rs. 90,000 Crores = ~ Rs. 21,00,000 Crores According to Payment System Indicators_DBIE available on RBI Website: Average Monthly Bank Transaction Volume = Rs. 1,20,00,000 Crores Taking into account: Currency Denomination Compression and a Limit Set for the Cash Transactions to Enjoy Legal Protection, required BTT Rate to generate the same tax revenue will be less than 1 %. * 1 : Source: RBI Website: Table 115: Receipts and Disbursements of Central and State Governments

8 Effects of the ArthaKranti Proposal There would be Adequate Revenue with Governments at All Levels [Please see previous page] Adequate funds for execution of projects of national, global importance will be available. Schemes for social security like Social Security Allowance can be successfully implemented to ensure Social Security for one and all. Generation of Black Money is Technically Impossible Merger of the existing Black Money into White Money [thanks to withdrawal of Higher Denominations] Government, Administration, Law and Order Maintaining Systems Freed from the Influence of the Parallel Economy Opportunities for Corruption in the taxation system eliminated plus an automatic check applied on Corruption thanks to: currency denomination compression and inherently traceable Bank Transactions Budgetary [White Money] Provisions for the Political System, freeing it from its dependence on the Parallel Economy Tax incidence shifted to Bank Transactions (the Flow of Money) replacing all other incidences of taxation. Functioning of Entire Tax Collection System will be Automatic, producing Daily Collection of Revenues at each Government Level, thus helping realize Decentralized Governance. No Filing of Returns, Challans etc. Industry Focus will Shift from Manipulation to Innovation. Same true of resources engaged in Tax Compliance in the present system. Effective control over Terrorism possible due to withdrawal of High Denomination Currency, thereby, reigning - their - currently uncontrolled, untraceable transactions and activities. Also the root causes of terrorism, namely, insecurity, poverty, disparity will be addressed through Social Security Allowance and an Empowered Governance. Capital will be available at ease and at cheaper rates, say around 4 % p.a. Prices of goods and services will be freed from Current Heavy Burden of both - Costly Capital and Heavy Taxes. Along with this, due to the availability of Cheaper Capital at Ease post ArthaKranti Implementation, the Effective Purchasing Power of the Individuals and therefore the Society will increase. A Principled, Prosperous and Peaceful Living for Every Individual Enabled Please Visit: