Abolish All Taxes?

Call it the economics of politics or the politics of economics, but it surely is an interesting, debatable and of course a novel idea – one which has caused heads to turn and mull over its feasibility. The BJP, it seems, is in favour of abolition of all taxes, whether on income, sales or excise. This surely sounds like an incredible idea, especially to the ears of those hardworking citizens who always have felt fleeced of their monies by the government by way of taxes.

Reportedly, the BJP is all set to include this idea in its vision document for the May 2014 general elections. This sounds like the mother of all populist ideas that we have seen until now in the past 67 years of our independence and democratic set-up. Nitin Gadkari, the former BJP president who is in charge of preparing the party's vision document 'India Vision 2025', said that the country earns Rs 14 lakh crore and there are around 1.5 lakh bank branches in operation.

"If we abolish these taxes and if we apply around 1 or 1.5 per cent of expenditure or transaction tax, then we will get revenue to the tune of around Rs 40000 lakh crore. So those 3.5 lakh people who are using beacons of various colours now, they will not be required anymore as no tribunals or commissioners will be required," Gadkari is reported to have said.

Adding to his rationale, he said, "I think along with transparency, there should be time-bound result-oriented administration coupled with right way of economic reforms and if it so happens, then the 1.5 lakh banks operating now will become 10 lakh. There is another suggestion of doing away with Rs 500 and Rs 1000 notes. We are deliberating on these proposals as we want transparency".

The idea has been floated on the website of an organisation called Arthakranti (an outfit floated by the RSS and run by one of the confidantes of its head honcho) in the form of a 5-point agenda set up for the administration. Apart from what has been stated above, the agenda also includes abolition of (transaction) tax on cash transactions and putting in place legal provisions to restrict cash transactions upto a certain limit.

The point here is not about whether the idea is a smart one or idiotic. It is not even about who has floated it. What really needs to be considered as a green shoot germinating from this agenda is whether government fiscal prudence as it stands today needs a rethink. It may sound too far-fetched to abolish all taxes and make do with just a transaction tax to fill the government coffers, but have you ever noticed how badly cascading taxes today in various forms hurt today? The biggest problem with government economics today is that of subsidies. Doing away with subsidies alone can bring in a good amount of respite to the strained government finances. The best example of this is the fuel subsidy, which is bleeding the government’s finances today.

Before discarding such ideas (abolition of taxes) as nonsensical, it would be good to consider what the ‘sensible’ administrators have achieved so far. The Food Security Bill is a glaring example of a blunder committed by our financial administrators and policymakers, and it surely has pushed us miles away from fiscal prudence and financial security as a nation. That is how it has been so far.

It may be said that the BJP may be going too fast on including the idea in its mission statement, and that the feasible thing to do would be to include the thought and not the idea as a whole in its mission statement. There could be other ways and means of achieving fiscal prudence and financial independence than just gunning for abolition of taxes. It should rather be looking at making a modest and practical beginning by abolishing subsidies and putting the state’s finances in order. Simply borrowing ideas and making tall claims on that basis could hurt the sentiment of the sensible voter and of course, jeopardise the future of the nation if these are to be implemented without proper thought and debate.