Abolish Personal Income tax and just tax expenditure : Only Team NAMO can do it !

Indians tendency of avoiding income taxes is legendary . People living in expensive  homes, driving expensive cars and shopping for expensive art and jewellery often do not even have a Permanent Account Number (PAN) card . Benaami/cash transactions are the major method to escape the tax dragnet.

We go extra mile to device creative methods to avoid paying taxes. Even the middle class spend hours with accountants to find ways to pay less taxes. The result is that in a country with a population of more than 1.3 billion, barely 2% pay income tax. And those are mostly who draw a fixed salary that is tax-deducted at source. 

It's easy to see why millions of Indians do not want to pay any income tax.To understand the root of this problem we will have to get at the root of the problem . 

For a start, transactions are mostly cash in an unstructured environment, making evasion hassle-free. the government cannot track income for small vendors as all of it is done in cash , It's nearly impossible .Even in developed nations these service provider are paid in cash and declare income voluntarily only . For eg US which has one of the highest digital economy in the world has more than 60% cash economy.

Even for  those of us who do pay taxes, the standard argument is that facilities provided in Liu of the taxes is for all to see. Lack of development of infrastructure and rampant corruption in government act as big damper . Even in NCR , the infrastructure is anything but world class. Except for the hallowed world of Lutyens' Delhi, where the ruling class and bureaucracy reside, streets are marked with potholes, power outages are frequent, the air is dirty . Basically the civic amenities are in sorry state .

Honest Taxpayers are forever envious of tax evaders as he is any how forced to pay for themselves what the State should: be that private guards i, inverters/generator for electricity, private education . Basically they live in a continuous cycle of double taxation: once to government as taxes to help improve infrastructure, and then out-of-pocket expenses to actually get these services their taxes should have paid for.

Worse, while companies are always taxed on the income after expenditure, individuals are taxed on income before expenditure. Thus basically there is little by way to incentivise tax evaders into becoming taxpayers.

Scrapping personal income taxes, on the other hand, will end both covert and thrifty spending. It will not only free up incomes that could find their way to higher spend but stop tax terrorism by IT department . It will not only give a fillip to consumables from groceries to gadgets but bring a lot of service provider on radar. The knock-on effect will create a demand for goods and services that will bolster economic activity. Ring-fenced with tighter GST monitoring, the government will have a winning formula.

Capturing all the expenses could be slightly tedious but by putting check and balances in the system and increasing the penalty can highly deter the practise . The government should deter the very use of cash. 

Also government can tax the super-rich, FM needs to recast the GST slabs to impose a higher tax on luxury goods and services like travel etc , ranging from lavish experiences to posh cars . Indian citizens taking money out of the country for buying assets such as property, investments or other big-ticket items should pay a reasonable tax .Also Long term capital gain tax  should be revised and as its being misused in the current state .

One of the major incentive for getting more people in tax dragnet is providing better services for which the government is charging the same and devising a method of accountability as well.  

Ultimately, the move might help the ruling party politically in the run up for 2019 election as it will  make good its 2014 poll promise of radical moves in taxation and will go down well with the middle class and burgeoning youth electorate and lower economic strata of the society.