There’s nothing sexy about death or taxes unless someone promises to abolish it if you vote for them, an American tax lawyer once said.
For the past month or so, top BJP leaders have been thinking aloud about a proposal to abolish income, sales and excise taxes and replace them with a tax on every transaction made with a plastic card, which they think can sweep every voter off his or her feet.
The buzz about the new proposal got louder on Sunday when BJP PM candidate Narendra Modi said, “The present taxation system is a burden on the common man. There is a need to introduce a new system.”
Modi said this at an event organised in New Delhi by Ramdev, who demanded abolition of all taxes and pitched for a single banking transaction tax if Modi becomes PM.
“Some problems may appear at first sight but we will find new solutions,” Modi said.
His remark assumed significance as BJP president Rajnath Singh and leader of the opposition in the Rajya Sabha Arun Jaitley too appeared inclined to give it serious thought.
Last year, the UPA government had come up with a Direct Tax Code Bill to replace the income tax law that is more than 50 years old. But the new bill, a brainchild of finance minister P Chidambaram since 2008, didn’t offer any radical abolition.
In fact, the DTC Bill kept the I-T exemption limit unchanged at Rs. 2 lakh for individuals. It proposed a fourth slab with a 35% tax rate for those with an annual income of over Rs. 10 crore, drawing protests from industry and business.
A parliamentary standing committee, led by the BJP’s Yashwant Sinha, which examined the bill, favoured raising the exemption limit to Rs. 3 lakh for individuals and reworking the tax slabs.
Last month, former BJP president Nitin Gadkari was the first to hint that the party was looking for an Aam Aadmi Party-type pledge that would rock with voters.
The BJP, he said, may incorporate a proposal to abolish income, sales and excise taxes in its Vision 2025 document, which will be released before the polls. Rajnath Singh later came out in support of the idea.
On January 2, Pune-based anti-tax group Arthakranti made a presentation to senior BJP leaders, including Rajnath Singh, LK Advani, Sushma Swaraj, Arun Jaitley, former finance minister Yashwant Sinha and Nitin Gadkari, on simplifying taxation by a flat banking transaction tax.
But few leaders are impressed by the proposal apart from Gadkari and Subramanian Swamy, who heads a sub-panel drafting the party’s vision document on economic issues.
Sinha minced no words, saying, “We will have to go back to Vedic days if we abolish income, sales and excise tax.” Jaitley too thought it was a complicated idea and instead favoured rationalisation of the tax system.
“You cannot tax the rich and the poor at the same rate. Also, some taxes are collected by states and the Centre. There are legal issues involved too. We need to examine all aspects,” he said at Ramdev’s function.