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Monday, January 6, 2014

Namo speaks on abolition of Income tax - Harish Rawat hits out at Ramdev

The debate is raging on…….the incumbent candidate of BJP spoke on this, which induced a Congress person to voice abuses on the person who provided the platform. Most salaried people would grieve this ….the Income tax – tax deducted at source.. as a law abiding, perhaps many of us do not have any issue in paying it……. but why is it that it is only the salaried class that borne the brunt … while the so called professionals, the most earning people in entertainment industry, sports all get away .. !!  Searching on Income tax, read that : Harish Rawat, a Congress leader has spoken out against spiritual leader Ramdev, who compared Narendra Modi to Jawaharlal Nehru. "Jawaharlal Nehru was one of the founders of the Indian nation. Ramdev is a fool to compare him to Modi,"  Rawat is quoted as saying  in an interview with CNN-IBN. In another news, the Income Tax department  moved theDelhi High Court seeking "directions/clarifications" of the December 12 order by which the assets of mobile phone handset maker Nokia in India were defreezed.

Though called Income Tax Act 1961, it came into force effective 1st April 1962.   In India, presently the highest slab is 30% + surcharge – for those having a taxable income of Rs.10 lakhs and more…. there are two more slabs 10% & 20% …… in Feb 2013, in the Union Budget, Finance Minister increased the tax liability of the rich by levying a surcharge of 10% on taxable income that exceeds Rs.1 crore. This was announced to be  one-time surcharge, applicable only for the assessment year 2014-2015. Not sure how many were affected by this………. There are people owning swanky cars, big palatial bungalows and lots of riches – but many of them do not pay tax or evade tax for most part of their income.  

Taxing the income has been one of the ways of raising revenue practised since centuries.  The Income Tax history in modern India dates back to 1860. In this year first Income Tax Act was introduced and which remained in force for a period of 5 years. This Act lapsed in 1865. Thereafter Act-II of 1886 was in force. In 1918 many provisions were recast. 

One argument in favour of abolition is that : No income tax means more spending power, more demand, more manufacture, more jobs. In short, a faster growing economy Income tax leads to tax evasion as people don't declare their true income.  Recently, BJP's prime ministerial candidate spoke directly on this.  Speaking at function organised by yoga guru Baba Ramdev in Delhi, Narendra Modi promised a substantial reform of the tax system which "is a burden on the common man. There is need to reform it. It is the need of the time The poor don't pay any income tax, and the rich get a big chunk of their incomes from dividends and capital gains - very little from salaries. Finance Minister P Chidambaram said in his last budget that just over 42,800 people have declared taxable incomes of over Rs 1 crore annually. Another statistic: 63 percent of the total taxes collected from individuals comes from just 400,000 people earning more than Rs 20 lakh. In sum: out of India’s taxpaying base of around 35-40 million, only 1 percent accounts for the bulk of the tax collections. Put another way, 99 percent of India’s taxpayers are being forced to file returns and pay paltry amounts of taxes for no good reasons. It is harassment and hassle without purpose. Even among the 400,000 who do pay more taxes, it’s largely because they can't evade it. The taxes are probably deducted from salaries or other incomes.

A web search further led me to this news – which perhaps should be hidden from P. Chidambaram and others …….. the BBC report states that France's highest court has approved a 75% tax on high earnersthat is one of President Francois Hollande's signature policies. The initial proposal to tax individual incomes was ruled unconstitutional by the Constitutional Council almost exactly one year ago. But the government modified it to make employers liable for the 75% tax on salaries exceeding 1m euros (£830,000). The levy will last two years, affecting income earned this year and in 2014.

Football clubs in France went on strike earlier this year over the issue, saying many of France's clubs are financially fragile and say the plans could spark an exodus of top players who are paid huge salaries. The Qatari-owned Paris Saint-Germain has more than 10 players whose pay exceeds 1m euros, including the Swedish striker Zlatan Ibrahimovic. There has also been a chorus of protest from businesses and wealthy individuals who have condemned the tax - including film star Gerard Depardieu, who left the country in protest.

Polls suggest a large majority in France back the temporary tax. Unlike many other countries in Europe, France aims to bring down its huge public deficit by raising taxes as well as some spending cuts. The highest tax rate in the UK is 45% and is applied to individuals.

So the debate would rage on !!

With regards – S. Sampathkumar

1 comment:

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