BJP drops income tax abolition idea

  • Shekhar Iyer, Hindustan Times, New Delhi
  • Updated: Jan 16, 2014 00:50 IST

As BJP prime ministerial candidate Narendra Modi called for reforms to check "tax terrorism" in the country, top leaders of the party were clear they would not root for abolition of income tax as demanded by Baba Ramdev.

Instead, the BJP would pledge to undertake revamp or rationalization of taxes if it was voted to power at the Centre.

"The scrapping of income tax is out of question, as it was never our idea," said a senior BJP leader on condition of anonymity, emphasising that ideas like a uniform transaction tax as substitute for income tax would not work. Other leaders said Modi had not given any promise to Ramdev to abolish income tax but only promised to get all proposals examined for "meaningful" changes in the tax system.

Modi's speech to Ficci on Wednesday underscored the BJP's approach, they maintained. As Modi put it, "This is one sector where there is a need for serious debate. All stakeholders should sit and brainstorm about tax reforms. If you give your suggestions, the BJP will think it over”.

For more than a month, top BJP leaders have been discussing a proposal to abolish income, sales and excise taxes and replace them with a tax on every transaction made through bank.

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 enthuse voters.

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 Jaitley and Sinha voiced opposition to the proposal.

Jaitely held that the proposed changes could blur the distinction between the rich and the poor. The poor would end up paying the same amount of tax as the rich. Sinha said “We would have to go back to the Vedic days if we abolish income, sales and excise tax.”

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. The DTC Bill kept the IT exemption limit unchanged at R2 lakh for individuals. It proposed a fourth slab, with a 35% tax rate for those with an annual income of over R10 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 R3 lakh for individuals and reworking the tax slabs.

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