Replacing Income Tax with Expenditure Tax is the Blockbuster Reform India Needs…
The shift from the income to expenditure base will not only mitigate harmful effect of a non-comprehensive income tax but will reduce extravagant consumption and promote savings .
Every stimulus package to boost the economy has its own burdening impact on the country’s fiscal position. However, a stimulus through tax reforms will be more helpful in infusing resilience in the economy in a sustainable manner. Finance Minister Nirmala Sitharaman is seeking suggestions from stakeholders in the run-up to finalise the annual budget for 2022-23. It is high time to go for an out-of-the-box initiative on the front of personal income tax. There is an opportunity to provide stimulus through direct tax reform in the form of an expenditure tax, which will be a more rational substitute for the income tax.
If personal income tax is done away with, about 6.32 crore people will have the freedom from the burden of submitting annual Income Tax Returns (ITR). The ITR has a demoralising effect on new entrepreneurs and emerging start-ups to grow as they are not exempted from personal tax compliances. Income tax regulations require people to maintain and submit various records and file returns. The Income Tax Department tirelessly scrutinises millions of returns, which are followed by queries, clarifications, refunds and protracted correspondence.
The litigations, if any, go on for years, taking a toll on both the citizens and the government.
The various organisations complying with TDS will also be free from the burden of collecting, remitting and submitting various returns if personal Income Tax is shelved.