No more Expenditure Tax Please- No more trial & Error Please
Finance Minister Nirmala Sitharaman is seeking suggestions from stakeholders for its annual budget for 2022-23 to be presented in the parliament on 1ST Feb 2022.
Every budget is a time to introspect and retrospect. This is the time to review the past performance and set the tone for the future performance. Every budget is designed to promote the economic and social objectives of the Government. Every budget contains the proposal to encourage something and discourage something.
Few years back, there was a proposal which found place of discussion all over the country was regarding the introduction of the Banking Transactions Tax which was moved with an aim to end income tax with banking tax. It was proposed by the paper writer that every transaction be made mandatory through banking channel and very movement of fund through this banking channel may be taxed thereafter. The proposal has ended up in vacuum.
Now, the another proposal is there to replace income tax with expenditure tax. The concept would be that the Expenditure Tax Act would ensure the required revenue flow to the exchequer better than the present levy by way of Income Tax. The expenditure Tax Act may govern all the taxation related to the chargeable expenditure incurred by any person. The concept of expenditure tax is to concentrate on the expenditure and not income. It is exactly opposite to the income tax wherein earning capacity is taxed as against actual expenses which is taxed in expenditure tax Act.
The present features of the income tax levy shows some noteworthy observation which makes policy makers to think that the Income Tax Act is not as powerful as it should have been. Let us have a look at some of the shocking statistics:
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The Income Tax Department has to scrutinize lakhs of returns, for ensure due collection of the taxes.
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This is further complicated by TDS & TCS provisions.
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Only 8,600 individuals have revealed that their annual income is above Rs 5 crore.
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About 42,800 people have declared taxable income of over Rs 1 crore annually.
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Further, four lakh people with income more than Rs 20 lakh.
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Only 2,200 doctors, chartered accountants, lawyers and other professionals have disclosed annual income of more than Rs 1 crore from their profession.
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1% of the taxpayers account for 63% of the income taxes revenue contribution.
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In short, 99% of taxpayers are filing the return within minimal taxes.
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Rich Agriculturists hardly pay any income tax.
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Only 1.46 crore individuals in India are liable to pay income tax, which is less than 1% of the population.
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Out of gross tax revenue of Rs 24,23,020 crore for 2020-21, the income tax was budgeted at Rs 6,38,000 crore which comes to 26.30% of total revenue receipts. Corporate tax of Rs 6,81,000 crore (28%), GST Rs 6,90,500 crore (28.5%), excise duties Rs 2,67,000 crore (11%), customs Rs 1,38,000 crore (5.70%), and service tax Rs 1,020 crore (0.045%).
Even though the statistics doesn’t suggests great picture, still there are various submission as to why the Expenditure tax should not be considered as n alternative to the Income Tax Act. Few of this could be summarized as under:
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The shift from the income to expenditure will reduce extravagant consumption and promote savings.
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There is already a system in place for collection of the revenue by the Government. Any stoppage or change would hamper the present revenue system.
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India is still largely unorganized economy wherein controlling the expenditure through parallel economy could not be ruled out.
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The country has various cross and check to ensure the taxation at the point of income generation which is not so at present as far as expenditure tax is concerned.
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The country has already witnessed various trial and error in the form of demonetization, GST, New income Tax Portal, etc. Any further trial and error would make the country make cry.
