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Tax on income: the root cause of inflation in India

 

Posted on Friday May 30, 2014

Last updated Wednesday July 06, 2016

  Income, Expenditure, Tax Policy, India

Since Income is a good thing and Expenditure is a bad thing, therefore we should tax the "Expenditure" and not the "Income". It is not merely a change of tax system but it will change the psyche of the people.

Prof. Ramesh Gupta
 

The root cause of Inflation is the unnecessary expenditure one indulge in. It again compels for corruption which again generates Black Money which in turn causes Inflation. Generally, bad things are Taxed and not the good things. Since Income is a good thing and Expenditure is a bad thing, therefore we should tax the "Expenditure" and not the "Income".

It is not merely a change of tax system but it will change the psyche of the people. Once Income Tax is competely abolished, no income will get unreported and each and every rupee can be counted. Corruption will be curbed, Black Money will be reduced and Inflation will come under control.

Even psychologically, Income Tax kills incentive of the people to work more as they no longer desire to earn more. I have seen many teachers refusing evaluation work simply because they fear—out of every thousand rupees earned, Rs. 350 will go in Taxes.

Even Historically, Income Tax is a stigma on Indians. Income Tax, in the form of legislation was imposed upon Indians for the first time in 1860 by Sir James Wilson and it is on record that it was imposed on Indians to recover financial losses caused to then Indian Government run by East India Company due to "Mutiny" in 1857, Obviously to punish Indians for participating and supporting the "Mutiny". When Income Tax is abolished, no one will need to deposit his Income in Swiss Banks, Indian wealth will remain within India. No Black Money will be generated and the Income earned shall be put to use for the progress of our nation.

To recover Expenditure Tax, we are not to go after each and every rupee spent. At the end of a financial year, citizens should be required to disclose their savings. The Income minus savings shall be the amount which should attract Expenditure Tax. Like 80C, even in Expenditure Tax, we may have certain clauses where money spent on basic needs like food, health and education may get rebate in Expenditure Tax to certain limits. The Expenditure Tax will automatically encourage Austerity Drive and check Inflation.

So, "REPLACE INCOME TAX by EXPENDITURE TAX" is the only MANTRA or "Magic Lamp" to control Inflation.

[Professor Ramesh Gupta is an educationist and freelance writer who also is making his debut as a writer with the book "Bachhan, Gandhi and Me," to be published soon. He can be contacted at: rameshguptakuk@gmail.com]

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