Limited Paper Currency

TOP Tax system will run on limited paper currency 

 TOP Tax system, operated by banks, will run on limited paper currency to eliminate black money, fake currency, corruption, ransoms and extortions. In the present economic system, there is huge money in physical form (bills/notes). For example in India, there is an estimated physical currency of 10,72,020 crores with the public out of total money supply of 77,25,560 crores excluding fake currency in the economic system (As at 2012 - June 29 ). This physical currency is about 13.8% of the total money supply in the economic system. The percentage of physical money may vary from country to country. There are reported to be plenty of cases of lootings, robberies, homicides, extortions, ransoms, and bribes across the world in almost all nations because of this huge money in physical form. This physical money, in huge amounts, is being transferred from one hand to other eluding all tax nets in transactions of commodities or goods. The unaccounted GDP is said to be too heavy and varies from country to country depending upon the corruption level that exists in that country. In addition to this black money there are also huge amounts of fake currency that has contaminated the genuine currency. The combined effect of the black money and fake currency is playing havoc with economies of many countries. Now money is being treated as an income generating asset and wealth instead of using it as a medium in exchange of commodities, goods, services, and shares, physical and intellectual works. The huge accumulation of money in few pockets in the form of black money is making the cyclic circulation of money in the economic system to be erratic (some times more cycles per year and some times less cycles per year) with stagnation/non usage of money causing economic recession at times. The multiplier effect on the money in banking finance system is decreasing the real face value of the physical currency. Although the individual’s earnings are increasing every year, the purchase value of the currency is decreasing and reached almost 1/10th of its face value. TOP Tax system tries to fix this problem by qualitative and quantitative supply of money in economic system so that the purchase value of physical currency at its face value remains high and same for longer period of time. The prices of commodities or services will remain same or even decrease enhancing the purchasing capacity of people every year with increase in earnings (per capita income) each year. In the suggested TOP Tax system 99.7% of the money supply available in the economic system will be in dematerialised form in the accounts of citizens, Governments and companies. Only small portion of money, equalling just 0.3% of the total money supply in the economic system, will be in physical form i.e. currency notes or coins. Under TOP Tax system the value of the limited paper currency should be equal to the value of the [GDP of that country – (exports – imports)] divided by 365. (If GDP = private consumption + gross investment +government spending + Exports – imports). This limited paper currency equalling to 0.3% of the total money supply in the economic system would be more than sufficient if we assume that the average each day consumption of total GDP can be bought by physical currency alone. (100/365 = 0.273). In real terms the low valued commodities or services like, vegetables, fruits, milk, edibles, papers etc., which ought to be bought by physical currency, constitute about 30% of total value of the GDP. In the TOP Tax system all higher valued commodities or services will have to be bought through debit cards, cheques, demand drafts or online cash transfers because of both limited paper currency and restricted monthly cash withdrawals from their accounts. That means even this 0.3% physical currency is more than thrice than actually required. So the retail sellers, street vendors, hawkers, salespersons, who rely on physical money for their business, would not be disturbed. Every year additional physical currency, equal to 0.3% value of the growth rate of the GDP and additional currency equal to mutilated and torn notes, can be inducted into economic system through government spending. Every person will be allowed only limited withdrawal of cash from his /her savings or earnings from his/her Main Savings Account even though he/she has huge amount of earning/savings. Other than cash withdrawals, he/she has to spend, invest or donate his/her earnings through debit cards, cheques, demand drafts or online cash transfers. The monthly cash withdrawal limit for each citizen can be calculated as follows; - The value of the [GDP value of that country – (exports – imports)] divided by total number of MSA’s divided by 12 (months) [GDP / MSA’s / 12]. Please not that each citizen above age of 15 years will have only one Main Savings Account (MSA). The monthly withdrawal limit (cash in physical form) will vary from country to country depending upon its GDP value. For example in India, the parallel economy being run by black money almost equalling the accounted GDP of the country and huge volumes of fake currency will be totally eradicated with the demonetisation of higher value currency notes (Rs 1000, 500, 100, 50 notes) in the suggested TOP Tax system paving way for corruption free society. So there will be no generation of black money and fake currency, and accumulation and stacking of money in physical form (cash) will not be possible. Money will be constantly pumped back into the system so as to avoid Profit Tax. The circulation of money in the economic system will be at constant rate with more cycles while checking inflation even at higher growth rate. The more cycles or exchange of money more times means money is spread evenly reaching all people. TOP Tax system would also arrest illegal activities such as drug trafficking, and arms trafficking. Once launched into this TOP Tax system prices would continue to decline to reach a minimum level of ¾th and further up to half level of the present prices due to the following factors namely, low tax component (below 11%), low interest rates (3% per annum), no tax compliance costs and fully open market with more players in the business. Money will be purely utilised only for exchange of goods, commodities, assets, services, shares, physical and intellectual works. When the TOP Tax system reaches its final destination, the prices of commodities/goods or services include only the value/cost of manpower (physical/intellectual) where abundant raw materials are available. In the present system the prices of commodities/goods or services include various components like raw materials cost, tax, profit, interest, corruption, tax compliance cost, man power (physical/intellectual), transport, power (fuel/electricity) and shelf life. The final result of TOP Tax system will be the achievement of perfect equilibrium between demand and supply; development and equality; growth and inflation; real money and credit money (loaned money); revenues and expenditure. The lopsided development among people and regions that is being witnessed in the present economic system will cease to exist. The natural resource and wealth of a country can be equally distributed among the people. Read full articl from..............

http://www.taxationreforms.com

http://www.optimaltaxation.net

Poated by VIJAYA KRUSHNA VARMA