Idea of scrapping income tax attractive, but not easy: Jaitley

New Delhi: A proposal to replace income tax and excise with a single tax on banking transaction is "attractive" but several questions have to be answered before it is implemented, senior BJP leader Arun Jaitely said today.

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.

Arun Jaitley. AFP

Jaitley said the first challenge which the proposed tax structure would face could be from the states, as federalism is quite strong in the present situation.

"In the current political scenario, federalism is at centre stage, and 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," he 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.

Responding to a proposal on currency compression 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. "..this proposal has forced us to think and we are participating in it with open heart. I hope you (Ramdev) and experts will further have elaborate discussions over it and will take it forward," he said.

Addressing the seminar, Ramdev proposed taxation structure, including five to seven slabs of BTT ranging from 0.10 per cent to 30 per cent; recalling currency notes of Rs 500 and Rs 1,000 and fair distribution of tax proceeds to centre, states and local bodies.

He 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.

PTI
PTI