This is my first blog, so let me start with an apologetic note that I am not a very proficient writer, nor a geek. Just a common man with some common sense, which is now quite uncommon amongst most of us.
I just had a brainstorming session with my friend and colleague yesterday about taxation rules prevalent in Modern India, a country that is one of the biggest economies of Asia. I am proud to be an Indian but that does not stop me from going far from facts, which is accepted seldom by individuals , who often get defensive due to various reasons. Accepting reality is an attribute which will awaken India and show them their areas of improvement. Accepting mistakes will trigger the mechanisms of correcting them. Defense is not the solution to stop criticism. Inadvertently most of our population is still struggling in the lowest trapezium of Maslow's Triangle of Hierarchy of needs. Reasons enumerable, solutions infinite, but let me now come to the thought that pricked my ever-working brainchild.
Taxation rules can be much simplified in Indian economy. Rather than having different taxation elements, why do we not have just one direct tax. Simplifies the entire process. I know I am no finance expert and this article might demand the attention of many critics, if ever they read this blog :). But I'm simplistic and optimistic and most of all I have a clear conscience.
Leaving the gas apart, let us assume that all Indians have a bank account and the only tax is 1% of their daily bank transactions. To illustrate this theory numerically, let me now demonstrate this with a simple calculation.
No of bank accounts 60 billion assuming that 40% of the population is minors and students
Minimum transaction INR 100/- occurs in a day
Bank Transaction amt in a day INR 6000 Billion
Tax in a day INR 60 Billion
Tax in a year INR 21900 Billion
Not a small amount with a minimum transaction assumed, now if this model is exemplified in real circumstances will reduce a lot of burden from many bodies and will definitely have a positive impact in revenue. No hidden costs at all. You pay tax for what you buy.
I know many people - I repeat if they read this blog - will have differing views, they might also feel that this concept is useless , but as a responsible citizen of the nation I am now exercising my Right to Speech . I am neither an Economist. I love my country and want it to thrive, bring down bureaucracy , see that it is not criticized or made fun of. This is my first attempt. Whether I am right or wrong will come with experience but atleast I feel light in my conscience that I made an attempt.
Jai Hind
I just had a brainstorming session with my friend and colleague yesterday about taxation rules prevalent in Modern India, a country that is one of the biggest economies of Asia. I am proud to be an Indian but that does not stop me from going far from facts, which is accepted seldom by individuals , who often get defensive due to various reasons. Accepting reality is an attribute which will awaken India and show them their areas of improvement. Accepting mistakes will trigger the mechanisms of correcting them. Defense is not the solution to stop criticism. Inadvertently most of our population is still struggling in the lowest trapezium of Maslow's Triangle of Hierarchy of needs. Reasons enumerable, solutions infinite, but let me now come to the thought that pricked my ever-working brainchild.
Taxation rules can be much simplified in Indian economy. Rather than having different taxation elements, why do we not have just one direct tax. Simplifies the entire process. I know I am no finance expert and this article might demand the attention of many critics, if ever they read this blog :). But I'm simplistic and optimistic and most of all I have a clear conscience.
Leaving the gas apart, let us assume that all Indians have a bank account and the only tax is 1% of their daily bank transactions. To illustrate this theory numerically, let me now demonstrate this with a simple calculation.
No of bank accounts 60 billion assuming that 40% of the population is minors and students
Minimum transaction INR 100/- occurs in a day
Bank Transaction amt in a day INR 6000 Billion
Tax in a day INR 60 Billion
Tax in a year INR 21900 Billion
Not a small amount with a minimum transaction assumed, now if this model is exemplified in real circumstances will reduce a lot of burden from many bodies and will definitely have a positive impact in revenue. No hidden costs at all. You pay tax for what you buy.
I know many people - I repeat if they read this blog - will have differing views, they might also feel that this concept is useless , but as a responsible citizen of the nation I am now exercising my Right to Speech . I am neither an Economist. I love my country and want it to thrive, bring down bureaucracy , see that it is not criticized or made fun of. This is my first attempt. Whether I am right or wrong will come with experience but atleast I feel light in my conscience that I made an attempt.
Jai Hind
Nice thought!
ReplyDeleteHello Indian
ReplyDeleteThank you for your honest feedback .As you said I'm clearly not a finance person and have to brush up. But am just trying to make lives simple for all of us. I agree that we have an army of people to judge intricacies in the taxation laws and rules and I do not mean to hurt thier sentiments and have respect for the job they are doing. The tax is based on transactions , yes but you wind up paying less and the common man and industrialists do not suffer. They pay for what they have an exchange. This is a very crude way, I agree but some food for thought. Why not bring everything under one banner. I know on grounds situations are very difficult but we should aim at getting them simple. Now the GDP is 4.1 Trillion USD but 1% of that as tax i.e 0.041 trillion USD is also not a small amount provided we stop the corruption in India.
Also Growth rate of economy is generally measured in terms of GDP.In an open economy GDP is more relevant than GNP due to capital flows but Relatively poor quality of data on net factor earnings from abroad in many countries. Alo now we are calculating tax on disposable income. However, due to following reasons, GDP fails to serve as a complete/adequate index of welfare:
(a) Income distribution is not reflected at all in NI. Even a very high GDP may not contribute much to the well-being of a nation if it is not distributed equally (corporate salary controversy)
(b) Apart from income there are many other factors such as better education, health and drinking water facilities, which determine human welfare. We can’t ignore them
Anyways thanks for your feedback, there is always room for improvement :)
Regards
This is a great post! I am interested in your take on how we can reduce corruption.... Please blog again soon.
ReplyDeleteDude, no offence, but did you even read your comment once before you posted it, it is pure gibberish! I came back because I wanted to see whether you are sporting enough to keep my comment, but obviously you are not (though I have to admit that your response to my comment, without my comment being there, seems a bit weird). Here is the analysis of your comment:
ReplyDelete1. "Now the GDP is 4.1 Trillion USD but 1% of that as tax i.e 0.041 trillion USD is also not a small amount"
When you use phrases like "small amount" it is evident you are not oblivious to the world of finance. Do you even understand WHY the government levies tax on people? It is to take care of the countries expenses, so that you can utilize common utilities like roads, discounted rations, government agencies, armies, police etc. In finance there is no "small amount" and "large amount", it is about whether it is a sufficient amount. The GDP figure was given to you in my comment to make you ponder on the enormity of the costs a government incurs to support more than a billion people, 0.041 Trillion USD is a miniscule amount, it will not cater to the needs of this humongous nation. As my friend sitting beside me comments "Badi badi baatein karna bahut aasan hai, but baaki paisa kya uska chacha leke aayega?" It is like a business. If your revenue (in this case GDP) is a hundred rupees, and you want to give 99 rupees to your employees (the citizens) and only utilize 1 rupee to cater to the costs of the business, can you run your the costs of a Rs 100 a month business with Re 1? No you cannot!
2. "The tax is based on transactions , yes but you wind up paying less and the common man and industrialists do not suffer. They pay for what they have an exchange"
If you are above 18 you should not be making this comment, this comment seems to come from a kid who wants to pay less tax and is least bothered about anything else. It is not about how less you pay, it is more about how you run a fr****** nation which is the second largest nation in the world. You gotta pay what you gotta pay in order for the country to run, else you become a country which cannot cater with roads, buildings, bridges, an army and a zillion things which you, my friend, take for granted. Yes, India is corrupt, yes, India has a lot of faults in its system, but if you reduced the taxation to 1%, India would be more like those tattered African nations which have no roads, not bridges and no army. I dont even understand what you are saying there when you say "They pay for what they have an exchange" because it is incorrect grammar.
3. "Also Growth rate of economy is generally measured in terms of GDP.In an open economy GDP is more relevant than GNP due to capital flows but Relatively poor quality of data on net factor earnings from abroad in many countries"
This is the gibberish I was talking about. Did you even read what you typed, or did you just want to use some fancy financial words in a blog to make it look good? This statement does not make sense either in English or in Financial Geek language, apart from having incorrect grammar (is it a copy paste?) It is also totally irrelevant to the discussion we are having. We are not talking of growth rate of economy, that topic is totally irrelevant because we are discussing the basic principles of taxation. I gave you the GDP number only to make you realize why the number you gave in your blog is so miniscule, to give you an idea of the kind of money a country of a billion people deals with, and the enormity of the task that the Government has.
CONTINUED IN SECOND COMMENT…
CONTINUED FROM FIRST COMMENT:
ReplyDelete4. "GDP fails to serve as a complete/adequate index of welfare"
LMAO, I can only roll and laugh, pardon me for my... erm... lame attitude. Why in heavens name are we discussing index of welfare and GDP as an indication? I am not disputing any of this, I am just disputing your absolutely lame theory on taxation, and all I am saying that dude, its not wrong to blog about a financial topic, for heaves sake do some research before you float an absolutely ridiculous theory and become a laughing stock. All those points about GDP not being an accurate indication of welfare, well who said it was, its bloody obvious it isnt. If I wanted to show you welfare I'd tell you about per-capita income, but we are not talking welfare we are talking taxation. And your sentence on "now we are calculating tax on disposable income" is incorrect, what are you talking of? YOU are calculating tax on disposable income, why would you do that?
I have only two pieces of advice (considering that I charge Rs 6000 per hour for advice I really shouldnt be giving it free).
a) Before blogging on a topic you have no background on, please do some research and reading, dont blog about taxation without knowing the basics of taxation and float a theory that is so ridiculous that it shouldnt even be debated, this is the basic respect you can give to your readers. Chai ki tapri pe koyi bhi conversation chalta hai, because your audience is limited, not so with blogging.
b) When you know you have a very very lame argument, and it has been ripped to pieces, dont try to defend a lost cause. "Banjar zameen ko jitna bhi seechoge, fasal wahan nahi ugega". You will not rise and shine by talking jargon, you will rise and shine if you can talk substance.
And if you are sporting enough to be a man, and face criticism and take it in a positive way, you will not delete criticism when it comes your way, and not shy away from publishing comments that talk negatively of your post. Else you are not being true to yourself, if you just want to publish those fake comments which say "hey, nice blog" and massage your ego
ReplyDeleteDear Indian,
ReplyDeleteIf I wanted a new theory of taxation, I would have read one of the latest pieces in AER, or something on dynamic public finance, which seems to be the rage. This blogger does not have a PhD in Economics (which I do), and so I understand that he is just saying something that came to the top of his head, that well, is flawed, but SO WHAT? We have all come up with ideas that have been lame or incorrect - moreover, IF this blogger's job were to be an Economics professor (which mine is), then sure - go ahead and blame him for not doing adequate research.
There have been many times when I have thought, "Jeez, would it not be nice to have computers and technology do blah." And this blogger who does work in tech would likely say, "Man, this s**t was done 5 years ago and no, it sucked." Should I do "research" on technology before I have a thought about it and post it? Perhaps, but I don't think I should garner the type of criticism you seem to levy at this person.
At the end of the day, new ideas suck most of the time, even from established people in relevant fields. What is important is for people to be kind while criticizing. We all make mistakes - even you spelled "heavens" wrong in your own response while critiquing this blogger's grammar ("for heaves sake do some research").
I guess at some level, my main criticism of your critique is that you took this blog post so damn seriously (seriously enough that you chose to repost your comments). If you want a serious/semi serious economics blog, read Greg Mankiw's blog, Marginal Revolution, or Cheap Talk. This blog is for Anand's thoughts and if it offends you so much, just go read something else. I am sure there is SOMETHING on the internet that will catch your fancy.
Its always sad when a blogger cant stand his own ground and has to ask friends to come and defend his post. No response from Mr. Blogger, big response from Mr. Friend-of-blogger. Mr. Blogger wrote an honest post, so what if it sucked. Mr. Blog-reader left some commments with some critique, no response from Mr. Blogger, but big defending comment from Mr. Friend-of-blogger. To Mr. Friend-of-blogger-who-is-also-PhD, welcome to the club, I did not repost any comment, I wrote additional comments, my original comment was deleted (I wonder why). My objections were not on a new idea, not even so much on the post, my objections were on the senseless banter in the response to my comment. And of course to the fact that Mr. Blogger has to call Mr. PhD to defend. When someone has to ask people to NOT read his blog, then the person should consider whether the person should write it at all. Guys, I am outta here, you are right Mr. PhD, there are better blogs to read. ** Indian clicks on the UNSUBSCRIBE button and deletes the blog from his blog roll** Damn people who cant take some sporting criticism. You can reply all you want to my comments ;) coz I wont be here to read them. Sigh!
ReplyDeleteHello Mr Indian
ReplyDeleteWhat I have learnt from this blog are some potential disadvantages of written communication.
You go on a holiday and have just enough time and people take your absence otherwise :) They think that you have advocated your friends to defend your stand.
Well I would like to thank you for your comments and sorry about deleting your blog. You even inspired me to the extent that I wrote a blog dedicated to your criticism. Thank you for letting me know where I lack and I will do the needful to improve.
As far as Prashant's comments go, he saw you criticizing me and being a close friend of mine couldn't stop himself from replying. Just like you took my blog too seriously, he took your reply.
So chill down buddies, we are all sporting, Criticism is healthy and I really appreciate your knowledge in finance, which is certainly not my cup of tea. Lets keep this communication go healthy.
We are here to constructively build a fraternity, which can never be built unless we have a healthy discussion.
And for sure , I will research before I blog a reply to your comments whether you read them or not
Indian is strange. He/she keeps calling me Mr. PhD or Mr. Friend of Blogger when I have explicitly not hidden behind some strange name. You can call me Prashant, you slick blog reader. I sort of enjoy this mud slinging to be honest.
ReplyDeleteAnyway, glad Indian has left the building. Your posts maybe senseless but they are very entertaining, which I why I read them Anand. It is like the little bit of ghee in your daal - it may not be very good for you, but it sure makes life interesting.