‘Expenditure Tax’ in place of Income Tax : Indeed a Blockbuster Reform
Like myself, many other tax payers may be getting Bronze, Silver or even Gold Certificate issued by the Central Board of Direct Taxes (CBDT) every year towards payment of Personal Income Tax (PIT). But getting that Certificate is not free of any hassles. One has to be very meticulous in paying the requisite income tax as also file the returns called the Income Tax Returns (ITRs). Now, given to understand that there is a blockbuster reform in the offing whereby stakeholders’ suggestions are sought in the run-up to finalise the annual budget for 2022-23 by the Finance Ministry to bring about a shift in income tax to tax payable based on expenditure don. It is believed such a shift in tax base might definitely reduce the extravagant consumption and also contribute to increase in savings. It is indeed high time to think of an out-of-the-box initiative on this front which will prove a blockbuster reform. There are many countries such as the UAE, Qatar, Oman, Kuwait, Bahrain, Saudi Arabia, Brunei Darussalam, etc. to name a few, where the people of those countries are not required to pay Income Tax but instead only contribute towards the social security. In India, while majority of the people are paying minuscule amount as tax owing to their income but are still coerced into filing their respective ITRs.
Most of the income tax paying class is the salaried middle class and for whom the taxes are deducted as TDS meaning, Tax Deducted at Source and hence such people cannot even think of evading paying tax for obvious reasons. The salaried class pays the tax on the income earned and after compulsory deduction of TDS, spends the net income for their livelihood, whereas the non-salaried classes spend money under various other heads of expenditure and thus reduce their overall tax liability. As per statistics, there are around four lakh people with annual income more than Rs. 20 lakh and which constitutes one per cent of the tax base and account for 63% of the income taxes collected with a tax paying base of about 1.5 crore people. Basically, there are around 4 Crore such pay payers and lakhs of them may be from Dwarka sub city even. This proposed initiative should be a ‘welcome step’ in the sense that tax should obviously be payable on the expenditure made by individuals instead of grossly taxing purely based on one’s income or pension amount which seems rather unjustified.
It is a common sense that an individual who is capable of spending more should naturally be taxed on his expenditure front, rather than an individual who believes in savings and no way both categories should be treated at par as far as payment of income tax is concerned. For the ordinary tax payer, there is in fact a sort of multiple taxation, as he/she is paying income tax as well as tax on his/her savings, apart from the Goods and Services Tax on every purchases, tax on utilities, other municipal taxes, etc. The rates of such proposed tax based on expenditure front called the Expenditure Tax should be made steeply progressive to tax the rich heavily as also compel one to go for savings and thereby curtail unnecessary or extravagant expenditure.
If Personal Income Tax (PIT) is done away with, not only more than 6 Crore people will have freedom from the burden of submitting the annual ITRs for which now the last date has further been extended from 31st December 2021 till 31st March 2022 but even the organizations complying with the TDS will also be free from the burden of collecting, remitting and submitting various returns if PIT is shelved. The option of replacing income tax with expenditure tax that is shift from the income base to expenditure base for tax purposes will be a blockbuster reform with immense potential to provide a fillip to the economy.
