The Bharatiya Janata Party's plan to replace direct tax (and even indirect tax) with a banking transaction tax (BTT) will not only be unjust, but unfeasible. According to the latest Budget, revenue from direct and indirect taxes for FY2014-15 is estimated almost at Rs 14 lakh crore, which means that at two per cent BTT, there should be transactions amounting to around Rs 700 lakh crore. Considering that India's gross domestic product for FY2014-15 is estimated at Rs 128 lakh crore, will it be really possible to raise sufficient resources to replace the current tax regime, also considering that most of the big-ticket transactions take place between governments. Further, it would never be fair to have the same tax rate for a fund transfer from a rickshaw puller or domestic maid in a city transferring money back home, and a millionaire paying for his holiday. The likely outcome of such a tax will be quite regressive since people would find ways to bypass the banking system.
Subhash Mittal New Delhi
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