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Simplified budget preparation

Posted by -----------VIJAYA KRUSHNA VARMA

Abstract: - A new economic system, which involves a new tax system called “TOP Tax system”, will make budget preparation of any country to be simple, easy and time saving exercise. There will be no tax collection expenditure for the Governments and no tax compliance costs for the people. This new tax system will relieve 7 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.

             In the present economic system the budget preparation is massive, multi staged, time consuming and laborious process. There are thousands of different high or very low valued goods or services to be segregated into different groups and taxed by both Centre and States with different taxes at three or more slab rates and, as if these are not enough, there are additional surcharges or cesses on selected goods. These tax structures and slab rates on different goods keep changing every year.  With these complicated tax structures and ever changing slab rates every year, the tax compliance by individual manufacturers, dealers and retailers has been difficult, cumbersome and bothersome. Taxes are being collected by different tax collection departments based on the accounts maintained by individuals who run industry or business. There is plenty of room for understatement of production and sales, tax evasion and consequent by-product of black money.

               But in the suggested TOP Tax system, which can be used as common tax system for all nations, there will be only a single tax called TOP (Transfer Or Purchase) Tax with fixed/stationary slab rate (4%) on all money transfers from one account to another account through cheque, debit card and online transfer/net banking in the purchase chain of consumers, retailers and manufacturers.  The Transfer Or Purchase TOP Tax (4%) will be deducted automatically by computer systems of banks on all money transfers from one account to another account irrespective of the fact that for what purpose (purchase/donation/salaries/loans) and by whom these money transfers have been made.

               The tax will be only on money transfers form one account to another rather than on the value of good/commodities and services with ever changing slab rates every year at budget time in the present taxation system. So the revenue collections for both Centre and Stated Governments will be instant, automatic, prompt and continuous process throughout the year with no room for tax evasion. There will be absolutely no tax collection expenditure for the Government and tax compliance cost for citizens. The purpose of budget preparation will be only the allocation of revenues, got from TOP Tax and Profit Tax, to various sectors, departments or ministries.  Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments and money supply into the economy are unified in this unique TOP Tax system.  So the budget presentation will become simple, smooth and time saving. Or even there will be no need for budget presentation each year. The yearly budget presentation can be solely utilised for percentage wise allocation and channelling of those automatically collected TOP Tax and Profit Tax revenues by banks to various sectors like housing, health care, education, drinking water, transport, irrigation, agriculture, environment, sanitation, infrastructure projects, rural development, defence and internal policing. The percentage of funds allocated to various ministries, departments or sectors can be changed every year depending upon the need, necessity and urgency acquired by them. The Government structure and machinery can be restructured, downsized and fine tuned not only to reduce wasteful expenditure but also to cater to the basic needs of people concerning housing, health care, education, sanitation and drinking water. To say briefly, the Government’s entire concentration and top most priority will shift from taxation, tax collection and enforcement to implementation of welfare schemes and development of infrastructure projects.

        In this new economic system the total revenues of any country will be approximately equal to 4% (TOP Tax) X 3 = 12% of the total GDP Value of that country while assuming that each commodity or service will change hands at an average of three times in the consumer, retailer, dealer and manufacturer chain. That means at each change of hands of any commodity or service the money will be transferred from one account to another account while leaving no room for tax evasion. There will be additional 5 to 10 % TOP Tax revenues on the resale of the shares, movable and immovable properties, and donations in that country. Furthermore there will be revenues from avoidable Profit tax. In all probability these revenues will be more than 150% of the revenues that are accruing from multiple taxes in the present economic system. Please remember that all these revenues will be collected without any tax collection expenditure on tax collection departments, tax tribunals and tax enforcement agencies

             In the suggested TOP Tax system the banks/service centres 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. Whenever a person migrates or moves to a new place his old address in Main Saving Account (MSA) should be changed with the new address to get monthly ration, subsidies, compensation/ex’gratia/relief funds in the event of natural calamities like earthquake, cyclones, floods, famine, drought, etc., in that particular place and also to get voting right in that particular constituency. In the suggested TOP Tax system the Main Savings Account (MSA) of each person shall be utilised as the de-mat account of that person for holding 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 rights 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 a digital/electronic form.

Vivid explanation: - The TOP Tax system’s tax collections (TOP Tax and Profit tax) for Government and tax payments/tax compliance by all citizens will be totally automatic and involuntary just like respiratory system in human body. Every account (MSA/SSA/CAN) is an involuntary taxpaying account.  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. The single tax net (Transfer Or Purchase tax) spreads all accounts and entire nation without bothering about who holds that account. This will put the tax component of goods/services at just one third of tax component of the existing system. Besides that there will be no tax collection expenditure for the Government and absolutely no tax compliance cost for paying either Direct taxes on personal incomes or Indirect taxes while running business or industry. The Transfer Or Purchase tax (4%) will be deducted automatically by computer systems of banks on all money transfers from one account to another account made through cheque, debit card, DD or online transfers irrespective of the fact that who holds that account and for what purpose that money transfers have been made. Thus tax collection and tax compliance will invariably become one and same. This automatic tax payment and tax collection system ensures that there will be no revenue leakages, unaccounted incomes and wealth. There will be no need for Governments to run separate tax collection departments and tax enforcement agencies and departments to see and verify accounts of all taxable citizens. Similarly people need not employ accountants or tax consultants to pay either Direct taxes or Indirect taxes or to submit tax returns. The plethora of tax laws, that are enacted and being used in the present system to enforce tax payments, will not be necessary at all in the TOP Tax system. The millions of tax related legal cases, which are emanated from non compliance of taxes and unaccounted incomes, and choking the judicial systems of all nations, will not be seen in the TOP Tax system. This is how the TOP Tax system works and helps both Government in Direct and Indirect tax collections without tax laws and enforcement, and citizens in paying taxes involuntarily without tax compliance (accounting, auditing, tax returns etc.,) costs.

              The collected tax revenues of TOP Tax and Profit Tax by banks will go to Government accounts (SACCA). These revenues will be transferred to various departments/ministries according to the percentages as allocated to these departments/ministries at the budget presentation. This percentage of allocations to various departments/ministries can be changed from time to time depending upon the necessity, need, urgency and emergency of the situation that arise unexpectedly. As stated earlier the revenue generation will be smooth, easy and continuous process at minimum burden on people making it possible for the simplified budget presentation. The collection of revenues from people to Government and transfer of these revenues from Government to people through various ministries/departments/agencies is smooth, hassle free and continuous process without leakages, tax collection, tax enforcement and tax compliance costs.

              In the present economic system Direct and Indirect taxes are being paid by citizens based on the accounts prepared by them and there is common financial year for all citizens to submit their accounts and Income tax returns. But in the TOP Tax system, TOP Tax and Profit tax will be on account basic. The financial year of each account SSA/CAN begins at the date it is opened and the financial year of MSA will begin at the date the Government allots MSA to each citizen at the age of 15. It doesn’t matter much what the financial year of each account is. The number of accounts that begin or end each day is approximately equal to the total number of accounts operated by all banks in that country divided by 365. The common financial year for the whole nation will become irrelevant, unimportant and redundant in the TOP Tax system. Each individual can have a chosen financial year for his every SSA account.

                In the present economic system, most of the money in circulation is in physical form (bills/notes). 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.

(Please see page money, money supply, loans, real money and credit money from page 18 to page 20)

              In the suggested TOP Tax system, most of the money (99.6%) available in the economic system, will be in dematerialised form in the accounts of citizens, Governments and companies. Only small portion of money (0.4%) will be in physical form (cash) i.e. coins or notes at low denomination. (For example - India) The parallel economy being run by black money almost equalling the accounted GDP of the country and an estimated Rs. 1, 60, 000crore 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.

           Under present economic system there are only a few players, more referees (license, permit, check posts, way bills, auditing, assessment and inspection) and more spectators.  The proposed Top tax system will leave space for more players, a few referees (pollution control board only) and a few spectators. The markets will become so wide open with no permits or licences required (except pollution control board’s permission) to run any business or industry except those where absolute necessity is required for permissions from Governments for mining ores, minerals, seeds, pesticides, explosives etc,.  Thus everyone can enter into the market and start his/her own business or industry without any shackles thereby reducing unemployment substantially. At the same time, with so many players in the market and high competition, the prices of goods/services will become cheaper, benefitting consumers. This invariably increases consumption leading to more production and growth rate.

           The basic concept of the TOP Tax system is that only single tax, in the place of present multiple taxes, will be paid by the people on commodities/services manufactured within the country, apart from the customs duty which is imposed only to save domestic industry or business. The customs duty can be removed on certain goods like cement and steel as and when necessary to check the jacked up prices caused by cartel among these companies and also on agriculture produce when sufficient food grain production is not available for consumption or procurement towards essential buffer stock, because of drought or other natural calamities. So the annual budget presentation, if necessary, will be mainly utilised to distribute and allocate revenues to various sectors, departments and welfare schemes instead of focussing on taxation, tax collection and enforcement on tax compliance.

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 the 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 at huge expenditure for both States and Centre combined.

 6. The tax component on any commodity, product 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

-

-

 

 Example: 2 - It shows how the Profit tax on minimum balance amounts recorded in each financial year excluding the previous or last taxed amount will be deducted from each Main Savings account (MSA) 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

2,99,000

50,00,000

-

-

2008-‘09

3,00,000

70,00,000

30% of (3,00,000)

90,000.00

2009-‘10

4,00,000

4,50,000

30% of (4,00,000-3,00,000)

30,000.00

2010-‘11

2,00,000

8,00,000

-

-

2011-‘12

4,50,000

5,00,000

30% of (4,50,000-4,00,000)

15,000.00

2012-‘13

4,50,000

10,00,000

-

-

2013-‘14

6,00,000

80,00,000

30% of (6,00,000-4,50,000)

45,000.00

 

Now it is clearly understood that the Transfer Or Purchase (TOP) Tax will be same on cash transfers in all three accounts namely Main Savings Account (MSA), Sub Savings Account (SSA) and Corporation Account Number (CAN). The Profit Tax is also same in Main Savings Account and Sub Savings Account except the minimum storage balance in Main Savings Account (MSA). The Profit Tax on minimum balance in Main Savings Account will be levied from Rs. 3 lakhs onwards. The Profit Tax on minimum balance in Sub Savings Account starts from zero onwards. In the case of Corporation Account Number (CAN), the Profit Tax will have to be levied in the form of Corporation Tax as in the existing system.

     Please note that each person will have only one permanent and life time Main Savings Account (MSA) but can have as many Sub Savings Account (SSA) as he/she can wish. Similarly the Profit Tax will be on account basic and totally avoidable, instead of individual basic and compulsory as in the present economic system. Please also note that the Profit Tax on minimum balance recorded in each year in Main Savings Account will be levied from Rs. 3, 00,000 onwards. In the present system the Income Tax, accounting, auditing and tax returns are compulsory. So persons who have taxable incomes through salary or business or industry or remuneration need to submit Income Tax returns annually.  But TOP Tax system’s Profit tax means it will be imposed on person’s incomes got through salary, remuneration, business, industry, donations and gifts after liberally used or spent on expenditure/spending, various investments, gifts and donations. Profit tax of 30% on minimum balance recorded in the financial year of each Sub Savings account (SSA) or Main Savings account   (irrespective of the holder of that account) operated by any bank/service centre will be deducted on the last day of the financial year of that particular SSA or MSA and will be transferred to State and Centre’s combined account (SACCA). 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. Please understand that minimum balance recorded in the financial year of each Sub Savings account (SSA) or Main Savings account  means the money unused or stagnated for more than one year. In the next financial year of the MSA or SSA, the Profit Tax will be levied on the additional unused or stagnated money over the previous taxed amount. That means there will be no recurring profit tax on unused or stored money. Once taxed, the unused money can be spent and recharged/restored without being re taxed for the entire life of that account. In the case of capital gains from a sale of any property or asset, a person will have a minimum of 364 days and maximum of 1 year and 364 day’s period to avoid Profit Tax from sale proceeds (capital gains) to reinvest. Similarly 4% Transfer Or Purchase tax (TOP Tax), in lieu of present all indirect taxes and various surcharges, will be deducted from every money transfer in each Sub Savings Account or Main Savings Account irrespective of the fact that whoever holds that account and on what purpose the amount has been transferred (purchase, gift, donation, salary/remuneration or any other purpose) operated by any bank or service centre and transferred to State and Centre’s combined account (SACCA). Thus all individuals who earn through salaries, remunerations, gifts, and donations will need not pay income tax and submit income tax returns annually. Thus people will be relieved from the cobweb of present ambiguous and complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing and tax returns, and consequent quagmire of all tax related cases.

     

Read full article fromm----

http://www.nationalbudget.net

http://www.budgetandfinance.com

http://www.taxesandrevenues.com

posted by VIJAYA KRUSHNA VARMA


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