[Sawyer]

Originally Posted by srishiva

There are lots of transactions that I myself do which should not be taxed. Same with people transferring amounts to help each etc. Have they considered this (not sure they can) while coming up with a value for current transactions ?

There might be some gotchas like the current scheme which everyone realized after experience.

There is a very simple response: it is a banking transaction tax, full stop. Doing a transaction attracts the tax liability on the inward side; there is no use saying I am doing things that should not be taxed; all it takes to incur a tax liability is a banking transaction, that is what the new law would have to say, no exceptions, no loop holes; it is a paradigm shift from thinking what should be/should not be taxed under the existing tax laws. Exceptions and loopholes means a slide back to a tax administration and then this effort fails before it has taken off.

Yes, someone receiving help, or a loan, via a bank transfer would also be taxed. No exceptions. A tax collection scheme run with no intervention, by automated technology of the kind Indians are expert at designing.

To put it in perspective for yourself, make a quick estimate of all the inward transactions in your bank account, and see how much 3% comes to.

Compare that with the income tax you pay; and estimate if you can how much you are paying as excise/sales tax/VAT/service tax/cess on all you spend or buy. I would be very surprised if you will not be far better off than today on just the income tax.

And no one is saying that this should be done overnight. There needs to be a lot of thought, and many things to think and see through. But the approach has to be: How do we make this happen, not - Why this cannot happen. And if something cannot be handled via interference free automation, it should not be in the law relating to BTT.

That isn't the gotcha, it is all doable, sending a rocket to Mars is more difficult and we have done that. The big gotcha is what I have pointed out - the ENORMOUS vested interest from the bureaucracy; they will never allow this to happen. That is the gotcha. The other big gotcha is that the center/state wheeling dealing that this will never be allowed to happen. So the real hurdles to this is from the bureaucracy and the politicians.

Today afternoon, I visited Axis Bank, Basaveswara Nagar for withdrawing some money from my account. But, I was told that cash got exhausted. So, I withdrew ₹ 2,000 from the ATM and got a press-fresh 2 k note, no ₹ 100 notes, which I badly wanted. I used my credit card to pay for ₹ 500 worth of fuel for my son's Classic 500 and shopping.

[vibbs]

Originally Posted by sukhoi30

Every time I visit a neighborhood clinic or hospital, I pay a consultation fees ranging from Rs. 200 to Rs. 1000. As far as I recall, every one takes only cash. I diligently ask for receipt, which they give, but mostly they are "loose" receipts.

Well not much on topic however since you have mentioned one side, I thought I should share my experience of the other side too.

My wife's fifth month Anomaly scan was done at a diagnostic center in Navi Mumbai. Yes I drove down from Pune to get this scan done as all radiologists in Pune were on strike.

OK, so now this particular diagnostic center had a distinction between cash and card payment. Unlike other places who charge a premium if you pay by card, this place actually gave you a discount if you swipped your card, there by encouraging you to go cashless. Pretty surprising if you ask me.

I don't remember the discount as well as the diagnostic center now, will see if I can recollect the name.

[benbsb29]

Originally Posted by mayankk

Now thats a generalization if I have ever seen one. Sounds like an editorial.
Whats your basis for this claim?
The lines are still here. There is no true spirit being shown, its resignation to fate. I still have not been able to get cash even once since the "implementation". I am salaried, and this has been a hair pulling exercise from the start.

Well said.

Reminded me of how news channels in the aftermath of a terrorist attack go on to say how the city has shown its true spirit and bounced back to normal. In reality, it hasn't. People affected have indeed resigned themselves to their helplessness and trying to carry on with life. That should not be mistaken for acceptance of the incident that occurred. It's just human beings trying to live from one hardship to the next.

[ashokrajagopal]

About the BTT, or the transaction tax that is being discussed as the alternative, I have a question to people who think that will work.

I understand the calculations are made based on transactions happening as of now -- but introducing a transaction tax would prompt people who are already on banking transactions to move out of it, wouldnt it ?

For example, I am a small time business employer who employs 5 people. As of now 20k paid thru bank as salary. To avoid transaction tax, wouldnt I withdraw the money and hand them over the money in cash ?
Wouldnt this also mean cases like paying friends, house hold helps, handy men, etc etc which is only done thru banking now because it is convenient will all be pulled out of the bank ?

Also, wouldnt this also create a problem of paying in kind, like gold ? All to bypass the whole banking transaction tax ?
Lets say if the govt comes up with a scheme to tackle all these, and monitor all these and cap all the high value in cash transactions. Wouldnt that require an equally sizeable bureaucracy ?

[joslicx]

Originally Posted by ashokrajagopal

About the BTT, or the transaction tax that is being discussed as the alternative, I have a question to people who think that will work.

I understand the calculations are made based on transactions happening as of now -- but introducing a transaction tax would prompt people who are already on banking transactions to move out of it, wouldnt it ?

For example, I am a small time business employer who employs 5 people. As of now 20k paid thru bank as salary. To avoid transaction tax, wouldnt I withdraw the money and hand them over the money in cash ?
Wouldnt this also mean cases like paying friends, house hold helps, handy men, etc etc which is only done thru banking now because it is convenient will all be pulled out of the bank ?

Also, wouldnt this also create a problem of paying in kind, like gold ? All to bypass the whole banking transaction tax ?
Lets say if the govt comes up with a scheme to tackle all these, and monitor all these and cap all the high value in cash transactions. Wouldnt that require an equally sizeable bureaucracy ?

If you read the fineprint, the largest denomination of money that is proposed as part of their proposal is just Rs. 50!

Surely some things could still be managed with cash. But I doubt you'd want to handle too much of it for any big payments. Also 2-3% tax is not that much so theres not much rationale in trying to avoid that.

[hybridpetrol]

Originally Posted by sukhoi30

Every time I visit a neighborhood clinic or hospital, I pay a consultation fees ranging from Rs. 200 to Rs. 1000. As far as I recall, every one takes only cash. I diligently ask for receipt, which they give, but mostly they are "loose" receipts.

It is not entirely true. There are many professionally managed hospitals that accept cards and cheques for the whole amount, and do not insist to pay on cash. The hospital where my son was born is one such hospital. I was having a tough financial situation during that time, so I paid entirely using my credit card (no service charges), and before the credit card due date, my insurance company had already made the settlement. It is only because the hospital accepted card, I was able to manage the situation easily.

However, there are also hospitals which do business only by cash, even large sums.
Recently, just one day before the note ban, a friend of mine admitted his mother to a hospital here in Coimbatore. The hospital refused to accept any type of cards - so it has to be all cash. They evn refused to accept even the old 500, 1000 notes, which the government had already insisted that the hospitals should accept. They took a cheque for full payment from my friend as a mortgage (they will not deposit the cheque!), and the friend stands in the queue everyday to withdraw and paying the hospital with new currency in installments! All because the friend says the doctor has done a good job in treating his mother!

Common man without black money is so adjusting accommodating that, the ones with black money can invent ingenuous ways to escape from tax net. The minds has to turn into white first, before the black money can go out of the country.

[binand]

Originally Posted by ashokrajagopal

but introducing a transaction tax would prompt people who are already on banking transactions to move out of it, wouldnt it ?

In addition, I think a 2% BTT will lead to a higher tax-to-GDP ratio (currently 16 or 17%). Not sure of this, but in which case I expect the economy to contract (since there is less money for consumption).

Plus it sounds detrimental to startups (opex focus) and outsourcing (insourcing leads to less tax burden).

[sdp1975]

Legal aspects of demonetization :
http://www.nationalheraldindia.com/n...-go-by-the-law .

Previous instances were done through ordinances. It will be interesting to see what the Supreme Court has to say on the legality of this move.

[ashokrajagopal]

Originally Posted by joslicx

If you read the fineprint, the largest denomination of money that is proposed as part of their proposal is just Rs. 50!

Surely some things could still be managed with cash. But I doubt you'd want to handle too much of it for any big payments. Also 2-3% tax is not that much so theres not much rationale in trying to avoid that.

Well, as long as there is no penalty for hoarding, surely there would be people willing to do cash transactions all around.
An even bigger incentive is for larger companies.
Lets say Business A and Business B is in mutual business mode, ie. A buys stuff from B and vice versa.
As of today, they may be doing transfers for each transaction.
When a BTT comes up, they can very well sum up all of these and pay only the net value, after adjusting their books.

The BTT can be beaten very effectively for such cases. It can simply force businesses to defer payments or sum up a number of transactions into one with a lot of IOUs going around in the middle.

And as per the fine print, this system provides RBI a control of the money supply and transactions only as long as it is in a Bank. Which means parallel banking systems can easily come up and use liquid cash or their own systems to override it. The government cannot legally use any method to stop those.

[Sawyer]

Originally Posted by ashokrajagopal

An even bigger incentive is for larger companies.
Lets say Business A and Business B is in mutual business mode, ie. A buys stuff from B and vice versa.
As of today, they may be doing transfers for each transaction.
When a BTT comes up, they can very well sum up all of these and pay only the net value, after adjusting their books.

The BTT can be beaten very effectively for such cases.

If this happens, it isn't a big deal, because the situation you are talking about is a very small part of the transactions of most large companies. Usually, they are sitting in a value chain, taking from one and passing on, after value add, to their customer, and so on, till the consumer. Take Tata Motors as one example - how many cars must their suppliers buying from them, every year, compared to their total sales?

So if they have the time and energy to do these adjustments - most companies of scale now run some kind of ERP systems that are very inefficient with this kind of meddling with automated process/document flows - good luck to them: BTT will shrug its shoulders and move on.

In time all will realise that it is better to pay the 3%, stop wasting time on how to not pay it, and focus energies on business growth to make more money, not these antics. Or be left behind in the market, and die.

But I can assure you that this will be one of the reasons the bureaucracy will come up with to sabotage the scheme, or twist it to an extent that their jobs, power, and opportunity to be corrupt are left intact. And they will come with long lists of reasons to scare everyone away from this approach; it will be a life and death matter for the bureaucracy.

I would love to see this entire scheme happen - not just a botched up thing that sees this BTT as a tax over and above all other present taxes - come into being. But I do not also expect to see it happen in my lifetime.

But a man can dream?

By the way, I think BTT can even accommodate the wheeling dealing of revenue sharing of the different tax receiving bodies; that can happen at the back end of deciding the revenue sharing percentages, and changing these from time to time based on wheeling/dealing, with no impact on the citizen facing front end that is busy collecting the BTT on every transaction, automatically.

[FrozeninTime]

It seems nobody wants to talk about lawyers.
I think they dont have black money it seems they are the cleanest profession.

Also it seems to me that Film industry does not have black money.
All actors file tax returns and dont launder money.
The producers dont evade tax and promptly pay tax.

After reading all posts following profession are source of black money it seems:

1.Doctors because they charge for something which should be free.
2. Small shops so called kirana shops - because they dont accept card or use Paytm or other internet wallet
3. Government employee except IAS
4. Politicians.

[ashokrajagopal]

Originally Posted by Sawyer

If this happens, it isn't a big deal, because the situation you are talking about is a very small part of the transactions of most large companies. Usually, they are sitting in a value chain, taking from one and passing on, after value add, to their customer, and so on, till the consumer. Take Tata Motors as one example - how many cars must their suppliers buying from them, every year, compared to their total sales?

I feel there are a lot of assumptions here, from how all large companies run, to how all ERP systems are built, to how companies will focus in future, to how bureaucracy will respond. I am not well educated on all of these, and have no comments.
Tata motors dealing with Harman is one thing, but Tata Group dealing with Samsung, the proposed parent of Harman is different.
My questions are still not answered, but may be its me.

[Thad E Ginathom]

Originally Posted by Sawyer

To put it in perspective for yourself, make a quick estimate of all the inward transactions in your bank account, and see how much 3% comes to.

Compare that with the income tax you pay; and estimate if you can how much you are paying as excise/sales tax/VAT/service tax/cess on all you spend or buy. I would be very surprised if you will not be far better off than today on just the income tax.

I had understood that there was a suggestion of a bank transaction tax that would replace income tax: surely there would still be a spending tax on goods and services?

[Sawyer]

There are a lot of rumours swirling around BTT: that it will replace IT is one.

But the Arthakranti proposal that I refer to deletes ALL taxes except customs duties that are retained as part of trading policies with other countries. And it is a lot more powerful because while IT has a black money incentivisation effect, it has a relatively streamlined administration. The spending taxes are a maze that even honest intentioned tax payers shudder to enter into. The red tape liberating effect of deletion of those taxes will be very high in terms of red tape elimination and streamlining movement of goods across the country. And their calculation of 3% needed on existing transactions breaks even with collection from all taxes, not just IT. So, for something of a bodge that replaces just IT, in theory at least, it ought to be less than 3%.