[maven]

Well they have to start somewhere. Not paying taxes is a birthright in the country except the salaried class who don't have an option. For instance I know a "businessman" who declared income of 4.5L last year and bought an A4. By that account I should own nothing short of a Mulsanne.

But what about the elephant in the room? Those multi Crore apartments that people seem to buying like grocery, those are the fellows who should be looked into first.

[GTO]

Agreed that the headline of that article is complete click-bait, and it's a silly comparison. However, what the article does is touch upon a very sensitive issue. There are simply too many millionaires in this country who don't pay taxes, but still splurge on cars. I've heard of people registering their cars in their friends / relatives names as they didn't have the requisite 'white' money to pay for it (although black money was plentiful).

Which is why, I'm personally happy with the 2016 budget that mandated 1% TCS (and thus, PAN card details) of folks buying million-rupee cars.

Originally Posted by GTO

From June 2016 onward, an additional 1% tax will be collected at the source (i.e. dealership) on all cars costing over Rs. 10 lakh. This is TCS (tax collected at source). If you are a tax-paying citizen (which you should be), the 1% TCS shouldn't make much of a difference as it will be credited back to you at the time of filing your income taxes. Dealerships will collect the tax, deposit it with the government and hand over a TCS certificate to you. This practice widens the tax base as there are a lot of evaders who buy million rupee cars, but don't file their returns!

Tax evasion is also the reason that the government has started taxing expenses so heavily!

[naut]

Originally Posted by GTO

Tax evasion is also the reason that the government has started taxing expenses so heavily!

Not sure, if I am missing something, but here's another way to look at it.

Base on the data published by the govt, it looks reasonable to conlculde the below

1. There are very few citizens (mostly salaried folk) who pay income taxes
2. Hence, the share of govt revenue through income tax of individuals should be miniscule compared to other sources of revenue such as income tax from business entities/companies, indirect taxes etc.
3. Perhaps this is also the reason, why govt has been constantly increasing taxation on goods and services over the years (bringing in more and more services under tax ambit etc).

Thus, why not use the opportunity and abolish income tax for individuals altogether? Profits of companies/business entities can continue to be taxed!

With this, the govt can continue to focus on increasing the indirect taxes. With this, the salaried class will not face the double whammy of paying tax on income and also paying tax while buying/availing products/services.

Today, I feel short changed that, I not only pay tax on my salary, but also pay tax on everything that I buy with my post-tax income (from matchbox to car to house and what not!). While most of these evaders get away with paying only the latter.

Of course the other alternative is to increase the tax base and try to get more individuals in the tax net. But, we all know the rate of success on that front!

So, doesn't it sound fair to abolish income tax on individuals? This should also win the govt some brownie points from the salaried individuals. Given that we just 1% of the population, may the brownies don't really matter!

[Nav-i-gator]

Originally Posted by GTO

Tax evasion is also the reason that the government has started taxing expenses so heavily!

Exactly the point I was trying to make. Govt not getting enough money through direct taxes, so making us pay taxes on all our expenses. Bad part is, while direct taxes are linked to the amount of money one makes, indirect taxes don't segregate a poor and a mighty rich person (both have to pay the same tax on buying a toothpaste for example. The same tax is more taxing for a poor). More indirect taxes means more burden on poor, and hence, Income tax evasion is not only illegal, but immoral also.

[srishiva]

The current policy penalizes salaried people nothing more. If indirect taxes have to make up for the abolishing income tax, finding fair rate of tax for everything would be a headache.

I think our country needs someone at helm who would think out of world solutions for resource mobilization. A certain Mr. Swamy could have helped instead of the lawyer (almost all of the top leaders are lawyers!) that we have today.

@Nav-i-gator, Not all items would have to get impacted due to indirect taxes. Food items, essentials like toothpaste can have the same as they have today. There is no scam that a rich guy would create buying too many of these

[Nav-i-gator]

Originally Posted by naut

Not sure, if I am missing something, but here's another way to look at it.

Base on the data published by the govt, it looks reasonable to conlculde the below

1. There are very few citizens (mostly salaried folk) who pay income taxes
2. Hence, the share of govt revenue through income tax of individuals should be miniscule compared to other sources of revenue such as income tax from business entities/companies, indirect taxes etc.
3. Perhaps this is also the reason, why govt has been constantly increasing taxation on goods and services over the years (bringing in more and more services under tax ambit etc).

Thus, why not use the opportunity and abolish income tax for individuals altogether? Profits of companies/business entities can continue to be taxed!

Corporate taxes are also direct taxes, i guess. And Direct taxes account for >50% of total tax revenue, because of that only. Coming to Income tax (the TDS part), yes I also feel shortchanged. But less because of the double taxation part, and more due to the feeling that most of the people who earn a lot more than me are not even paying any tax (and only paying indirect taxes on par with a poor, homeless person who could barely keep his family alive).

In my opinion, In an ideal world, there should be no indirect taxes, and a robust system to collect direct taxes at the source (that's a scenario only possible in a world where all transactions are white/wired/electronic and hence audit-able/traceable. Needless to say, this world never existed and might never exist).

[jinojohnt]

Originally Posted by vinit.merchant

IT department keeps a close eye on the luxury car purchases. A very keen eye. A decade back, anyone who bought a new Merc, his IT returns were scrutinized with a fine comb and in many cases, a scrutiny was ordered too, I am sure the practice is still in place.

Talking about luxury cars, my dad got a demand notice from Income Tax Dept (asking for the source of income), when he bought a new Maruti 800 in the year 1996

Originally Posted by Nav-i-gator

... indirect taxes don't segregate a poor and a mighty rich person (both have to pay the same tax on buying a toothpaste for example. The same tax is more taxing for a poor).

We can segregate products into 'Life-saving', 'Essential', 'Nice-to-have', 'Luxury', etc. and tax accordingly.
Life saving and Essential commodities can be spared from tax, while 'Luxury' items be taxed the highest.

[Nav-i-gator]

Originally Posted by srishiva

@Nav-i-gator, Not all items would have to get impacted due to indirect taxes. Food items, essentials like toothpaste can have the same as they have today. There is no scam that a rich guy would create buying too many of these

Originally Posted by jinojohnt

We can segregate products into 'Life-saving', 'Essential', 'Nice-to-have', 'Luxury', etc. and tax accordingly.
Life saving and Essential commodities can be spared from tax, while 'Luxury' items be taxed the highest.

We are missing the point here. What I meant is - Indirect taxes are to be paid by everyone. If these are more, it is more for everyone, if it is tax free, it is so for everyone (unlike direct taxes which are linked to the salary we are getting, higher tax for higher salary bracket). That's why indirect taxes are not a good way to earn revenue, ideally there should be no indirect taxes and only income taxes.

[blackwasp]

It's the salaried class that always faces this brunt. Pay tax on income, then pay tax on everything you buy. And we are just 1% of the population so we can't even protest ! It'll be futile. And after buying a car recently, almost 35-40% of the total amount is just the tax component, after paying taxes for being in the highest slab! Daylight robbery since we can't see the tax being utilised anyway.

Originally Posted by Nav-i-gator

In my opinion, In an ideal world, there should be no indirect taxes, and a robust system to collect direct taxes at the source (that's a scenario only possible in a world where all transactions are white/wired/electronic and hence audit-able/traceable. Needless to say, this world never existed and might never exist).

Completely OT- My friends and I used to discuss on trying ways to avoid black money and one of them way payment of money (any transaction over Rs 100) to happen through mobile phone only. Kind of like a wallet bases system but linked to PAN number. No transaction over Rs100 will be allowed through cash. This might solve black money issue and the problem of soiled/torn notes and no change Saar problem!

[m8002?]

Originally Posted by Nav-i-gator

We are missing the point here. What I meant is - Indirect taxes are to be paid by everyone. If these are more, it is more for everyone, if it is tax free, it is so for everyone (unlike direct taxes which are linked to the salary we are getting, higher tax for higher salary bracket). That's why indirect taxes are not a good way to earn revenue, ideally there should be no indirect taxes and only income taxes.

Isnt this what is causing black money in the first place? Where as if the tax was on consumption, then essentials like food can be tax free, a two wheeler can have 5% tax and a Merc 50% tax.

The economically weaker folks wouldnt care what the tax on Merc is since it doesnt impact them at all.

[Nav-i-gator]

Originally Posted by m8002?

Isnt this what is causing black money in the first place? Where as if the tax was on consumption, then essentials like food can be tax free, a two wheeler can have 5% tax and a Merc 50% tax.

The economically weaker folks wouldnt care what the tax on Merc is since it doesnt impact them at all.

Taxes need to be simplified, to understand as well as to implement (and if need be, to enforce). that is the first prerequisite to make taxes far reaching and easy to implement (that is why GST is so important). Direct taxes are simple, it's the various exemptions and deductions that make it so complicated, isn't it? Same is with indirect taxes. Consider liquor industry. Complicated tax structures make the overall industry so inefficient (and prone to exploitation by middle men with good relationships with govt insiders), it is detrimental to govt revenue potential as well.

Or consider Agriculture. Very noble idea to keep agricultural income tax free, considering majority of our working population still depend on agriculture. But guess what, most of the benefits are "reaped" by people who does not grow anything (the middlemen again), and millionaires, who own "farm houses"

[vishnurp99]

Tax evasion is a way of life in India. When more than 95% of the population does this, there is not much the law or govt can do about this. No govt can stop this since usually the govt functionaries from the clerk to the IAS officer and then the minister's PA and the minister are all beneficiaries/perpetrators of the crime. It's not just the big fry. It's also the small time shop keeper who buys a celerio using his black money showing his son's salary of 25000 as proof of income.

All the government can ensure is that this doesn't become very conspicuous.

We just have to accept that we live in a morally and ethically corrupt society. As they say "it's folly to be wise when you live in the land of the blind"