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Scrapping income tax will not be easy, says Arun Jaitley

Amid talk in his party for scrapping income tax and some other taxes, senior Bharatiya Janata Party (BJP) leader Arun Jaitley on Sunday suggested that such a proposal will not be easy to implement considering federal structure of nation.

twitter-logo PTI   New Delhi     Last Updated: January 20, 2014  | 10:02 IST
Scrapping income tax will not be easy: Arun Jaitley
BJP leader Arun Jaitley.

Amid talk in his party for scrapping income tax and some other taxes, senior Bharatiya Janata Party (BJP) leader Arun Jaitley on Sunday suggested that such a proposal will not be easy to implement, considering federal structure of nation.

"..In the current political scenario, federalism is at centre stage..when we start collecting taxes at one point, it will be a challenge for the Centre to make states understand that it will lead to increase in tax collection and there rights will not be hurt," Jaitley said.

The discussions on this proposal needed to be taken to states as the present environment in the country was of coalition politics and "states do not have trust on the Centre," he said.

However, earlier another BJP leader Nitin Gadkari had favoured abolition of income, sales and excise tax and in place of that levy transaction tax, and said party may include it in its vision document to be unveiled ahead of general elections next year.

"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 40,000 lakh crore," Gadkari had said.

Terming the proposal to replace income tax and excise witha single tax on banking transaction as "attractive", Jaitley said there are several questions which have to be answered before it is implemented.

He was commenting on a proposal of yoga guru Ramdev to replace all the existing taxes, including income tax, excise and other levies, with a single Banking Transaction Tax (BTT).

"..At present, society is distraught with excessive taxation, complex taxation and Inspector Raj and that's why this proposal looks attractive, but there are many questions in implementation of this. After that, it (has to) be taken to different political parties, states and experts," Jaitley said.

He was speaking at a seminar organised by Institute of Chartered Accountants of India on 'Simplification of Tax Laws in India'.

At the seminar, Ramdev put forth his proposal for a single tax-Banking Transaction Tax -in place of direct tax (income tax) and all indirect taxes-excise, customs and sales tax.

Speaking on a clause of currency compression in the proposal and move towards plastic currency or cheques, Jaitley said it has not been the characteristic of this country.

"In many countries, cash transactions have gradually come down. Unfortunately, it has not been the characteristic of this country and the reason is that people, for their mental satisfaction or for being secure, like to keep cash with them," he said.

However, Jaitley said the younger generation was using alternatives to cash and asked Ramdev to campaign about this to increase awareness.

The Leader of the Opposition in Rajya Sabha also sought a clarification, saying at present, farmers are not under the ambit of direct tax and the current tax structure levies higher rate of tax on higher income.

He said Ramdev's suggestion is appreciable and this proposed alternative tax regime has forced the party to think on the issue.

Addressing the seminar, Ramdev said once fully implemented, the proposed system would generate more that Rs 40 lakh crore per annum for the exchequer as against about Rs 10 lakh crore being collected presently.

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