Redefining The Role Of Banking Sector
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Redefining the role of banking sector

Posted by VIJAYA KRUSHNA VARMA

Abstract :---This paper called “TOP Tax system” redefines the role of banking sector to pave the way for future economic system to benefit 7 billion people of the world in all spheres of their lives in one form or the other. TOP Tax system suggests integration of taxation, tax collections, tax compliance, monetary system, money supply, registrations, budget preparation, public distribution, preparation of voter lists and population census.

Banking sector will become virtually the intermediaries between people and the Government for all tax collections and redistribution of funds/revenues from the Government to people, who should be the natural, eligible and legitimate recipients while eliminating whales, parasites and limpets

       In the present economic system a person’s or a company’s money, movable or immovable properties(like vehicles, plots, flats, houses, factories, commercial establishments, lands etc.,) shares, family tree, insurance policies and all other assets are recorded, managed and handled by different departments, agencies or institutions. But in the suggested TOP Tax system money, movable or immovable properties (like vehicles, plots, flats, houses, commercial establishments, lands etc.,) shares, family tree, insurance policies and all other assets are recorded, managed and handled in a single account called Main Savings Account (MSA) with five folders in case of individuals and in Corporate Account Numbers (CAN) with seven folders in case of companies which issued shares for public. These accounts MSA’s, SSA’s  and CAN’s will be maintained and operated by banks replacing different departments, tax collection and tax enforcement boards, agencies or institutions of the present economic system.

Thus people’s money, shares, all movable and immovable properties will be maintained in only one account (MSA) with different folders operated by banks. So money, shares and all other movable and immovable properties can be stored, maintained and used from this single account called Main Savings Account (MSA) with five folders in case of individuals and Corporate Account Numbers (CAN) with seven folders in case of companies which issued shares for public. Transfer of money, shares, movable and immovable properties, goods, services, physical and intellectual works are simultaneously transferred from one account to another account while purchasing or buying.

1. Usage of Main Savings Account (MSA) - There will be only one compulsory and mandatory MSA for each person given by the Government. This MSA will have five folders for each specific purpose of an individual.

The first folder (liquid money folder) will be used for storage and usage of money (in TOP Tax system it is called as liquid money) generated through savings/earnings/incomes/donations. This folder of MSA can also be used to run or operate any business or industry owned wholly by an individual.

The second folder (immovable property folder) shall be used for registration, storage and usage of ownership rights of all immovable properties like lands, flats, plots, commercial establishments, and etcetera. The ownership rights of these assets will be transferred from one person’s MSA to another person’s MSA while purchasing/selling/donating of these immovable properties.

The third folder (movable property folder) shall be utilised for ownership rights of all movable properties like vehicles, gold, jewellery, and etcetera. The ownership rights of these properties will be transferred from one person’s MSA to another person’s MSA while purchase/sale/donation of these movable properties. In the TOP Tax system the movable and immovable properties are called as solid money. These properties (solid money) will have both ownership rights and in physical enjoyment.

     Vivid explanation: -             In this suggested TOP Tax system the immovable property folder and the movable property folders of Main Savings Account (MSA) of each person shall be utilised as the de-mat account of that person for ownership rights of both movable and immovable properties like shares, lands, plots, flats, gold, silver, jewellery, ornaments, very high valued articles, motor cycles, cars, other vehicles and all other properties/assets. While purchasing or selling, the transfer of ownership of these assets/properties from one person to another person shall be made from one person’s MSA to another person’s MSA through banks/service centres in an electronic/digital form. So the transfer of assets like lands, plots, flats, gold, jewellery, ornaments and vehicles will take place in physical form upon the transfer of ownership right of that asset in digital form from one MSA (seller) to another MSA (buyer).  Larceny, burglaries, lootings and extortions will come to an end, because without the ownership rights of gold, silver, jewellery and other high valued items in the MSAs, they cannot be sold or bought. In literal sense banks will virtually act as custodians for people’s money, shares, assets and all movable and immovable properties. The bank branches/ banking service centres will be intermediaries between people and Depositary, who should be under full control, governed, monitored and checked by Central Bank of that particular country. In other words bank branches/banking service centres can be called as single window shops where all basic services of the people will be met. TOP Tax system suggests that total land record of the country should be dematerialised according to extent, location, mapping and ownership. The land belongs to people will be recorded in their respective MSAs. Similarly the land that belongs to Government, Government organisations, companies should be recorded in their respective accounts. In the TOP Tax system the bank branches/banking service centres will act as middle men for people, manufacturers, dealers, sellers and buyers for transfer or trade of money, shares, commodities, lands, flats, plots, vehicles, and other movable or immovable property while buying or selling at absolutely free of cost.

          Under the TOP tax system, lands, plots, flats or other properties purchased should be made through main savings account only. If any person buys land, plot, flat or any other property anywhere in India the extent and nature of the property will be credited in his Main Savings Account and the same property will be debited from the seller’s Main Savings Account (MSA). Whenever he/she sells any property that is credited in his MSA, the same will be debited from his/her Main Savings Account and the same property will be credited in the buyer’s Main Savings Account (MSA). Just like shares there will be no paper documents for properties. Unlike cash transfers the buyer’s presence and signature/authentication shall also be needed for any movable or immovable property transaction.

                      There will be no multiple selling of the same property to different people and unauthorised selling/purchase and illegal occupation of other person’s property without his/her knowing/consent will not be possible.

The fourth folder (shares/stocks folder) shall be utilised for storage and usage of ownership rights of shares/stocks, bonds, derivatives etc. The ownership rights of these securities will be transferred from one person’s MSA to another person’s MSA while buying/selling/donation. The shares will have only ownership rights and called as semi solid money.

The fifth folder (family folder) shall be utilised for family details and called as family folder. Marriage registration and child birth registrations will be made both in husband and wife’s family folders of MSAs. Based on the details in the family folders, monthly rations will be computed and transferred every month, in the form of cash, directly into the wife’s MSAs. Every child will get his/her own MSA account at the age of 15 years. The bank statement of The fifth folder (family folder) of MSA of any individual can be utilised as caste and income certificate, voter list, ration card and passport. It can be obtained within minutes from any bank and from anywhere in the country. People need not pay bribes to get these certificates or documents from revenue department and passport offices. All funds allocated towards welfare of SCs, STs and BCs can be transferred directly into the MSAs of these sections leaving no room for leakages, bribes and misappropriation of these funds.

Vivid explanation:- All   the details of a person’s occupation, educational qualifications, marriage, driving license, passport, his/her life partners name, PAN number (MSA) (and vice versa), children and their age etc, will be recorded in the fifth folder(family folder) of his/her Main Savings account.  The parents should register their child’s details in the data record of their Main Savings Account (MSA) within three months of their child’s birth. Once the child gets the age of 15 years he/she will automatically get PAN and MSA. The total care and welfare of the orphans should be taken by the State governments till the child reaches the age of 20 years.

     This system totally and permanently checks the ever increasing problem of illegal migration from Pakistan and Bangladesh changing the demographic proportion of India to an unimaginable level. Once all the citizens above the age of 15 years are given the mandatory Main Savings account (MSA) and the TOP Tax system becomes fully operational, no adult will be given Main Savings Account (MSA) thereafter. From hereafter every additional Main Savings Account MSA will be an offshoot of an existing MSA belonging to parents. There will be no question of additional fresh MSA without parent’s existing MSA. Similarly existing MSAs will come to cease upon the death of individuals. All the money, shares, movable and immovable properties recorded in the five folders of MSA of the deceased person will be transferred to his/her legal heirs. The total number of MSAs will increase every year depending upon the growth rate of population of that country. TOP Tax system will record; maintain every individual’s family record generation after generation. Therefore illegal migrants from other countries cannot enter illegally into India, get Main Savings Account or Sub Savings Accounts and assimilate in Indian population. It will be a lot easier for the government to detect terrorists and militants who cross over from across the border to indulge in unlawful activities.

TOP tax system will be operated solely by banks to provide different services for the Government like taxation, tax collection, tax enforcement; for issuing caste certificates, income certificates, voter lists, monthly rations, subsidies, pensions, calamity relief funds, passports, licences, fees reimbursements, scholarships etc., at absolutely free of cost. TOP Tax system, operated by banks, will also help people in getting all the above mentioned services at single window through their MSAs with five different folders. That means TOP Tax system will replace present system’s multiple departments like Income tax department, Central Excise department, CBDT, CBEC, Tax tribunals, passport department, census department, States’ commercial tax departments, civil supplies departments, registration departments, revenue departments etc., saving thousands of crores of Government’s non-plan expenditure.

2. Usage of Sub Savings Account (SSA):- Every person can open and operate as much number of SSAs as he/she wishes. The SSA will have only one folder called as liquid money folder. This folder shall be used for receiving, storage and usage of money to operate any business or industry by an individual.                                                                                                      .                                                                                                                                                            3. Usage of Corporate Account Number (CAN): -   Corporate companies, MNCs and Public limited companies which sold/issued shares to the public will be given CANs. Each Corporate Account Number will have seven folders for each specific operating/running purpose of the company.

The first folder shall be utilised for storage and usage of money for running that company.

The second folder shall be utilised for having all records of immovable properties like land, buildings, infrastructure and etcetera of that project/plant/business. The third folder shall be used for registration, storage and usage of ownership rights for all fleet of vehicles and other movable properties like machinery etcetera required for running of that company. The fourth folder shall be used for storage of all shares of the promoters and the public of that company.  The fifth folder shall contain the details and accounts of all the employed manpower of that company.  The sixth folder shall contain the detailed accounts of all raw materials and other required inputs bought and used for running of that company. The seventh folder shall contain the details and accounts of all products manufactured, sales and inventory. TOP Tax system’s CAN with seven folders is a new procedure to see that company’s financial books were clean, accurate, open and transparent to all share holders so that there can be no room for fraudulent and deceptive financial statements.

 Vivid explanation: - The TOP Tax system’s Corporate Account Numbers (CANs) with seven folders will make all companies’ accounts fully transparent and open to all share holders every day (unlike quarterly, half-year and yearly statements released by the companies in the present system) for inspection, study and analysis before investing their hard earned money in shares of those companies with sound financial position. The transparent accounting system in CANs with seven separate folders for money, movable property, immovable property, manpower, shares, raw materials and other inputs, and manufactured products and inventory will remove all frauds in accounting, securities, stocks and investment . These CANs with seven folders ensure that there will be no chance of fraudulent business practices of overstating profits, concealing debts, spreading the expenses out over several years, under voicing or over voicing of raw materials, inputs, and manufactured products, under or over stating of stocks, padding up of project cost and diverting of funds at grounding, construction, erection and all stages of project implementation and publication of falsified financial reports. The CANs of TOP Tax system can also check the diversion of funds from one company to another company within the group companies (same promoters).   The TOP tax system gives a big boost to stock markets as people start buying huge lots of shares to maintain minimum balance in their accounts in order to avoid Profit tax. There will be no significant effect of TOP tax system on intraday trading and Future options trading because the looser looses extra 4% of the loss amount only in the intraday trading.  People will prefer to buy shares on the long term and annual yield basis. They invest in the companies which give handsome dividends year after year.

                                  Banking sector will be entrusted with five main objectives namely -- 1)The tax collections from people, 2) the distribution of revenues from governments to people in the form of subsidies, relief funds in the event of natural calamities like earth quakes, floods, famines, pensions, cash transfers towards monthly rations, hospital bills, education bills, et., 3) providing all basic services including registrations of movable and immovable properties, driving licences, air, bus,  train tickets, permits, licences, payment of electricity, telephone bills, water cess, house taxes, issue of voter lists and voter slips, birth and death registrations, census figures at every day, every hour, every minute (unlike at every decade in the present system),           4) lending money to borrowers at the lowest PLR (average 3%per  annum). All these objectives can be met and carried through banks/service centres to all people at single window, situated nearest to their homes (5) implementation of welfare schemes to below poverty line people, who have no or meagre incomes, towards education, self employment and other areas, and monthly pensions to senior citizens (with no or paltry incomes) and physically challenged.

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                   Redefining the role of banking sector

             A common tax system for all nations

               Posted by VIJAYA KRUSHNA VARMA

                             I am suggesting new methods, models, and innovative and alternative policies in the areas of monetary system, budget preparation, banking finance system, public finance, optimal taxation, tax collection, tax compliance, subsidies, money supply, and fiscal policy to help remove corruption, tax evasion, economic recession, black money, fake currency, ransoms, robberies and societal inequalities. In my opinion, the proposed new economic system may usher in good governance, 100% tax compliance and corruption free environment. It suggests a single tax called “TOP Tax” (Transfer Or Purchase Tax) for both Centre and States combined in place of present multiple Indirect taxes with different slab rates on different goods/commodities/services and multiple Direct taxes with different slab rates, relieving 6.9 billion people of the world from the cobweb of ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and consequent quagmire of all tax related cases. Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments and money supply into the economy are unified and integrated in the banking system. Citizens need not maintain separate account books and submit tax returns annually for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. This new economic system involving a new tax system without multiple taxes, tax laws, tax collection departments, tax tribunals and tax enforcement agencies, envisages 20 to 30 % more revenues than presently accruing from multiple taxes collected by different tax collection departments/agencies. The availability of resources and capital flows, needed for economic recovery, is the self-priming character of the “TOP Tax system” without Government’s fiscal stimulus packages. This new economic system shall be operated by banks at minimum operating cost with limited paper currency (0.4%) and dematerialised money (99.6%) of the total money available in the economy in the particular country, thereby totally eliminating black money, tax evasion, fake currency, corruption and extortions.  

           Under this new taxation system the tax net, cast by banks, will be the broadest with absolutely no tax evasion, making it possible for the lowest tax slab rate and the cheapest prices of commodities/services. The redistribution of revenues from Government to people in the form of welfare schemes, subsidies and various relief funds will become easier without leakages, bribes and misappropriation.  Although this new taxation system is a basic model suggested mainly for India, the basic concept of taxation, tax collection and tax compliance methods can be adopted and implemented by all the developed and developing countries alike to benefit 6.9 billion people of the world in all spheres of their lives in one form or the other. 

This article contains seven parts: ----

1. Tax structure and direct benefits of the TOP Tax system.

2. Method of implementation of TOP Tax system.

3. Money supply and monetary policy

4. Operating cost of the TOP Tax system.

5. Comparative study of Tax revenues between present system and the proposed TOP Tax system.

6. Advantages of TOP Tax system

7. Summary of TOP Tax system

1. Tax structure and direct benefits of the suggested TOP Tax system 

Tax structure of suggested TOP Tax system

Present system

Direct/Indirect taxes(Centre and States)

 

Suggested TOP Tax system

suggested

slab rate

1.Income Tax

2.corporation Tax

3.capital gains Tax

4.wealth Tax

5.Securities transaction Tax

6.Central Excise duty

7.Customs duty

8.Service Tax

9.Sales tax/VAT by States

10.Stamp duty

11.land revenue

12.Professional Tax

13.State Excise

14.octroi

15.surcharges and other cess

16. Property Tax

17. Gift Tax

18. CST

 

1

 

 

 

5+6+8+9+10+12+14+15+17+18=                                                                         Transfer Or Purchase Tax (TOP Tax) States and Centre combined)

 

Slab rate = 4%

 

 

4%

 

 

 

2

 

      1+3+4=

   Profit tax (Totally avoidable) for States and Centre combined

 

30%

 

3

Corporation Tax by Centre (optional)

20%

4

 

Customs duty by Centre (optional)

nil

5

Excess land tax (States and Centre             combined) optional

 

 

6

State Excise  by States

 

 

         

There will be only one mandatory tax called TOP Tax with single slab rate(4%) for both Centre and States combined in the proposed TOP Tax system. The Profit tax in place of present Income tax and capital gains tax will be account basic and totally avoidable unlike individual basic and compulsory in the present system. For clear understanding please see table number 1 and 2 in page number 6 and 7.  Profit tax means it will be imposed on person’s incomes (if remained any) earned/got through salary, remuneration, business, industry, donations and gifts after liberally used on expenditure/spending, various investments, gifts and donations. In the present system, personal Income tax is levied on incomes earned/got through salary, remuneration, business, gifts, donations and sale proceeds (however with some exemptions) before used on expenditure/spending, donations and various investments. Under proposed TOP Tax system the Corporation Tax and Custom duty/Import duty can be levied by the Central government as usual to save small scale and domestic industries respectively. Similarly the excise duty on liquor and wines can be levied by the State governments as under the present system to inhibit heavy consumption and addiction.

Direct benefits of the suggested TOP Tax system                                                                                                                                                                       

Under proposed TOP Tax system there will be no Income Tax and other Direct taxes.                                               

        Benefits:

So under suggested TOP Tax system, people who have taxable incomes through salary/ remuneration/professional income/donation/gift/service/business/industry will benefit as they need not pay Income tax/other Direct taxes and submit Income Tax returns annually. 7 billion People of the world will be unshackled from all Direct taxes, tax laws, tax raids, tax returns, accounting and auditing.

Under suggested TOP Tax system there will be no Sales Tax (VAT), Central Excise Duty (CENVAT), Service Tax and all other Indirect Taxes.

        Benefits:-

        1. Markets will be fully open without any hurdles like multiple taxes, permits, licenses, way bills, accounting, auditing, tax returns and tax laws. Traders, manufacturers, transporters, dealers, retailers, vendors, contractors, service providers and all others will not need to maintain account books, sales lists, stock lists, way bills etc. No accounting and auditing for assessment purpose will be required for individuals who run business or industry. The present day trade barriers between manufacturers and consumers; between the States within the country and between the nations can be totally removed to make the whole world into one fully open market.

        2. Therefore all the check posts, within a TOP Tax system” implemented country, can be totally removed allowing free movement of industrial goods/commodities and agriculture produce from anywhere to anywhere in that country and benefitting all farmers, manufacturers, traders and more importantly the consumers.

        3. The entire truck owners will benefit as they need not pay bribes at check posts. They need not carry way bills while transporting industrial goods and agriculture produce from one place to another place in that TOP Tax system implemented country.

       4. The entire farming community will benefit as they can transport their agriculture produce from anywhere to anywhere and sell their produce at market prices.

5. There will be no tax collection expenditure for the Governments and no tax compliance costs for the people. Yet, the tax revenues from single tax (TOP Tax) will be 20 to 40% more than total revenues presently accruing from all Direct and Indirect taxes collected by multiple tax collection departments for both States and Centre combined at huge expenditure.

 6.The tax component on any product, commodity or service will be less than 11% while the average tax component is more than 35% in the present tax system.

 7. There will be absolutely no scope for tax evasion and it’s by products namely black money and corruption.

2...........Method of Implementation of TOP tax system: Basic model (India) 

 What is required for TOP tax system to be successfully implemented is the strong political will to build the basic infrastructure of providing banking service for every village/suburb/town or colony having a population of around 2000 with the help of private sector banks and institutions.

The Central government should give a permanent account number (PAN) by using biometric method and Iris identification to every citizen above the age of 15 years and make mandatory for every citizen to have only one Main Savings Account (MSA) with the same PAN in the bank/service centre situated at the village or colony where he lives in. The PAN and MSA number should be one and same.

Every citizen would be allowed to open any number of Sub Savings Accounts (SSA) as he/she wishes to operate business or industry in as many banks by using (MSA) number.

Under proposed TOP Tax system the accounting and auditing of the corporate or public           companies will be mandatory and compulsory as in the present system for protecting the interests of the investors. Corporate or public companies will be given Corporate Account Numbers (CAN). 

The Main Savings Account (MSA) should be used for buying of shares, land for agriculture or industrial purpose, plots, flats, gold, jewellery, vehicles, commercial establishments or any other movable or immovable property. The MSA shall also be used to receive or pay salaries, professional fees, service fees, remunerations, donations, loans etc. Main Savings Account is also needed to get driving licence, passport, voting right, subsidies, funds, monthly ration, pensions, remittances and loans (personal, agriculture, business, educational and industrial) and for getting compensation/exgratia/relief funds in the event of natural calamities like cyclones, earthquakes, floods, famines, accidents, etc,.

The Sub Savings Accounts (SSA) and also the Main Savings Accounts (MSA) can be used for running business, industry, schools, colleges, hospitals, hotels, restaurants, construction, studios, services, or any other type of business. Just like MSA, the SSA can also be used to receive or pay salaries, professional fees, service fees, remunerations, donations loans etc.

The corporate or public companies will have to operate all cash transactions through the Corporate Account Number (CAN) only.

After establishing sufficient number of banks/service centres by the Government (for example, India) with the help of private sector banks and financial institutions, all the citizens should be asked to deposit all the currency notes of 1000, 500, 100 and 50 rupees except 20, 10, 5, 2 rupee notes/coins, available with them in these banks in their newly given Main Savings Account (MSA) or Sub Savings Accounts (SSA) within a stipulated time of 30 days. All presently run savings accounts and current accounts should be converted in to Sub Savings Accounts (SSAs) with the same account numbers and can be operated from the same banks. Similarly, people who have money in the fixed deposits/FDRs will have to transfer all their money from these fixed deposits/FDRs to their respective newly given MSAs or newly opened/converted SSAs within the same stipulated period of 30 days.

After this grace period of 30 days, the Government (for example, India) needs to demonetise all notes of denomination 1000, 500, 100 and 50 rupee notes except 20, 10, 5, and 2   rupee notes.  From then on, the TOP tax system becomes operational. Every person shall be allowed to withdraw cash up to maximum of rupees 5,000 per month from his/her earnings or savings available in his/her Main Savings Account only. Thus a family of two can avail cash of 10,000 rupees maximum per month mainly to buy daily necessities like vegetables, milk, fruits, edibles, groceries, and all other small or low valued items.  A person’s maximum cash withdrawal of 5,000 per month from his/her Main Savings Account (MSA) through bank or ATM will be in Rs 20, Rs 10 and Rs. 5 notes only. A person can get some portion of his/her incomes/earnings transferred directly in to MSAs of his/her other non earning family members from source of his/her incomes/earnings so that his/her family can  withdraw more cash (currency) per month. Every individual’s incomes and savings will be in dematerialised form in his/her MSA or SSAs.

Other than cash withdrawals of maximum Rs. 5,000 per month from his/her Main Savings Account (MSA), no person will be allowed to withdraw cash from his/her Sub Savings Accounts (SSA). Every time a person buys high valued items, goods, vehicles, land, plot, flat, gold, jewellery, vehicles or any other movable or immovable property, avails physical or intellectual services or in case he/she lends, donates money to others, then he/she needs to transfer the required money from his/her Sub Savings Account/Main Savings Account through cheque, debit card or net banking (online cash transfers). Businessmen, traders, industrialists will have to make their cash transfers for all transactions through cheque, debit card or net banking (online cash transfer) from their Sub Savings Accounts/Main Savings Account. Similarly a person’s salary or remuneration or professional fee and all his/her incomes from business or industry will be credited to their Sub Savings Accounts or Main Savings Account through cheques, debit card or net banking (online cash transfers). All three accounts namely CAN, SSA and MSA can be utilised to receive, pay or store incomes/earnings/savings/donations/loans. But cash can be withdrawn only from MSA (if available) up to maximum Rs. 5000 per month per person. The remaining available money (dematerialised form) from MSA can be used or spent through debit card, cheque or online cash transfer.

For every transfer of amount, a 4% Transfer Or Purchase tax (TOP Tax) of that amount will be automatically deducted from his/her MSA/SSA account. This 4% tax amount on every cash transaction through MSA/SSA/CAN from all banks in a particular State will go to the combined account of State and Centre in that particular State. 30% of this amount from every State and Centre’ combined account (SACCA) will go to Central government pool account. The remaining 70% will be retained by the respective State governments. This 4% Transfer Or Purchase (TOP tax) can be reduced to 2% within 4 years from the adoption of this TOP tax system by reducing 0.50 basis points per year. This will further reduce the prices of the commodities benefitting consumers. All government accounts and banks will have to be exempted from this TOP tax.

Vivid explanation: This 4% Transfer Or Purchase Tax (TOP Tax) on each cash transfer, irrespective of the reason for such transfer (purchase, gift, donation, salary/remuneration or any other purpose), operated through Main Savings Accounts (MSA)/ Sub Savings Accounts (SSA)/ Corporate Account Numbers (CAN), and operated by any bank or service centre, will be automatically deducted from that account and transferred to State and Centre’s combined account (SACCA). The TOP Tax will be the same and uniform throughout the country on all cash transfers made through online/cheque/DD from all accounts towards purchase, gift, donation, and salary/fee/remuneration. So in the suggested TOP Tax system the tax base will be the largest to have the minimum slab rate and the lowest tax component on each commodity/service. People will get commodities/services at the lowest prices than in the present system. Furthermore the total revenues generated from TOP Tax from all cash transfers from all accounts will be more than double than the combined revenues of all States and Centre got from present multiple taxes with different slab rates. With limited paper currency and dematerialised money in the TOP tax system, every transaction will be transparent depicting the actual GDP of the country. In literal sense, every purchase, gift, donation and all types of payments will have to be carried through online cash transfers from one account to another account because of limited paper currency. The total revenues got from TOP Tax will be approximately equal to 3x4 %( 12%) of actual value of the GDP of that country in the manufacturer, dealer, retailer and consumer chain. As goods, commodities, services, donations, physical and intellectual woks change hands in the manufacturer, dealer, retailer and consumer chain dematerialised money will be transferred from one account to another account correspondingly.  Thus every cash transfer towards purchase, gift, donation, salary/remuneration or any other purpose will be accounted and within the system eliminating underground/shadow/unreported/hidden transactions operated by physical currency got from black money and fake currency in the present economic system.   In the present system the parallel economy, being run by black money and fake currency, is obscuring the real GDP and hampering or lowering the collection of revenues. The TOP Tax system will eliminate the black money and fake currencies at one go and depict the exact GDP of the country. The other salient feature of the TOP Tax system is the better economic management and austerity. The individuals, who run business or industry, will be relieved from ambiguous tax structures, plethora of tax laws, and mandatory sales lists, stock lists, accounting, auditing and tax returns.

 In addition to the Transfer Or Purchase (TOP) tax, a Profit Tax (PT) of 30% would be levied and automatically deducted once a year on the minimum amount recorded in the financial year of Main Savings Account (MSA) and each Sub Savings Account (SSA), if any, of every citizen. The financial year of the MSA of a person begins at the date the Government allots him/her the MSA. The financial year of the Sub Savings Account (SSA) will begin at the date a person chooses to open his/her SSA. This Profit Tax (PT) is an account basic and it is totally irrelevant who owns that account (MSA/SSA). The Profit Tax, 30% of minimum balance amount recorded in the MSA and each SSA (if any) of every person, will be automatically deducted on the last day of the financial year of that MSA and SSA (if any) of each person. The Profit tax in the next financial year of that particular MSA/SSA will be levied on the minimum balance recorded of that year minus the previous year’s taxed amount of that particular MSA/SSA ignoring the maximum amount, however huge may be. Thus the deducted Profit tax, 30% of minimum balance amount recorded in the MSA and each SSA (if any) of every person in a particular State, will be transferred to that State and centre’s combined account (SACCA). The combined taxes of TOP Tax and Profit tax, collected in every State and Centre’s combined account (SACCA), will have to be shared between that particular State and Centre in the ratio of that particular State getting 70% and Centre 30%. Hence the totally optional and avoidable Profit Tax will ensure that the money will be constantly pumped back into system keeping the economic growth at healthy rate. In the present system the huge black money, generated by hidden/shadow accounts, combined with huge fake currency is playing havoc with our economy.  Besides these two taxes namely TOP Tax, and Profit tax which can be avoidable, the Central Government shall impose the customs duty (import duty) and Corporation tax as in the existing system. Except these four taxes, the TOP Tax system suggests removal of all other Direct taxes, Indirect taxes and various surcharges levied in the present system.

The following two tables clearly illustrate how totally avoidable Profit Tax is deducted from SSA and MSA of a person on minimum balance amounts recorded in each financial year excluding the previous or last taxed amount.

Example1: It shows how the Profit tax on minimum balance amounts recorded each year excluding the previous or last taxed amount will be deducted from each Sub Savings account (SSA) operated by a bank/service centre irrespective of the fact that who holds that account.  

 

Year

Minimum balance of the  year

Maximum

Balance of the year

Profit Tax (PT) on the  Min. Amt. – The last taxed amount

Net Profit Tax (PT)Deducted

2007-‘08

10,000

50,00,000

30% of 10,000

3,000.00

2008-‘09

40,000

70,00,000

30% of (40,000-10,000)

9,000.00

2009-‘10

90,000

1,80,00,000

30% of (90,000-40,000)

15,000.00

2010-‘11

20,000

2,00,00,000

-

-

2011-‘12

1,50,000

5,00,000

30% of (1,50,000-90,000)

18,000.00

2012-‘13

1,50,000

10,00,000

-

-

2013-‘14

2,00,000

80,00,000

30% of (2,00,000-1,50,000)

15,000.00

2014-‘15

1,00,00,000

2,00,00,000

30% of (1,00,00,000-2,00,000)

29,40,000.00

2015-‘16

80,00,000

3,00,00,000

-

-


Read full article from---

http://www.taxationreforms.com

http://www.optimaltaxation.net

Posted by VIJAYA KRUHNA VARMA

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