Summary:
With the Government on the verge of becoming lame duck after December due to the looming Lok Sabha elections of 2019, it’s doubtful if the Government will go for such a revolutionary change in tax system.
By Dinesh Sharma
.
New Delhi Nov 16: A section in the present political dispensation has dusted off the old economic debate calling for replacing the income tax with the consumption tax.
It’s being argued that the abolition of the consumption tax will not only make economic sense but pay political dividends as well.
The advocates of the idea have cited the case of Japan where there has been several bouts of raising the consumption tax to kick-start the moribund economy.
Although Indian and Japanese economies are at different levels of development, it has been pointed out that drastic reduction or wholesale abolition of income tax would have multiple benefits.
The middle class in India looks for lower slab of income tax every time the Union Government presents the annual budget.
The main grouse is of salaried class which says that it suffers double whammy due to income tax and the inflation.
Besides, small businessmen and self-employed find the income tax coercive.
It’s being argued that the replacing income tax with consumption tax will give people much needed incentive to save.
This will place more money in the banking and financial systems.