Friday, March 30, 2012

Tax-free Regime in India




Tax-free Regime in India

The median CEO in US took home $ 14.4 Mln (Rs. 72 cr ) in 2011. A well paid 
CEO by the Entrepreneur brings the revenue into the Enterprise. Our 
Politicians/Bureaucrats are poorly paid.

DNA 2.4.2012
50,059 cops for 16,788 VIPs
New Delhi: VIP security and not law and order seems to be the top-most priority for most state governments.  According to a Home Ministry Report, 16,788 VIPs, mostly ministers, MPs, MLAs, Judges Bureaucrats, were guarded by 50,059 policemen...

These 16,788 VIPs are the core of our Rulers who can give us Tax-free regime if they take up the challenge of providing Tax-free regime by managing the National Assets Properly, Efficiently and Honestly!

India – called Devbhumi – God’s land, was known as Golden bird in the olden times.  It was so called because God has bestowed India with enormous resources of various kinds that are huge, inexhaustible and renewable.  These national assets can generate huge revenue year after year if managed properly, efficiently and – honestly. 
.
India is also lucky to have innumerable persons who have competence, integrity, honesty, nationalism, intelligence and a desire to serve their motherland and its people to their best of capability.  While we have many corrupt people, we also have likes of Vinod Rais, T.N. Sessions, in our country.  Our concept is that such noble people can manage our national assets in a manner that can raise sufficient revenue every year equivalent to those raised from Direct and Indirect Taxes – Corporate Tax, Taxes on Income, Wealth Tax, Service Tax and Taxes on Union Territories, Customs and Excise duties.  Income from these taxes has been estimated at Rs. 9,01,664 Crore for the FY 2011-12 in the Revised Budget Estimate and have been estimated to bring Rs. 10,77,612 Crore in the FY 2012-13.  Our approach is that quantum of revenue from these taxes can be generated from efficient management of national assets and the people can be given total tax-free regime.  .

It is a new revolutionary concept that needs serious consideration and ingenuity to achieve a noble goal – Tax-free Regime for the people of India.  If achieved, it will be a trendsetter for the entire world and the entire humanity.

As per the national budget 2012-13, Tax scenario is as follows:



REVENUE RECEIPTS



Rs. Crores 

2010-2011
2011-2012
2011-2012
2012-2013






Actuals @
Budget
Revised
Budget


Estimates
Estimates
Estimates
REVENUE RECEIPTS




1. Tax Revenue




Gross Tax Revenue
793072
932440
901664
1077612
Corporation Tax
298688
359990
327680
373227
Taxes on Income
146587
172026
171879
195786
Wealth Tax
687
635
1092
1244
Service Tax
71016
82000
95000
124000
Taxes on Union Territories
1982
1973
2317
2310
Sub-Total
518960
616624
597968
696567





Customs
135813
151700
153000
186694
Union Excise Duties
138299
164116
150696
194350
Sub-total
274112
315816
303696
381044
Total Revenue Receipts
        793072
932440
901664
1077612


P.S. Out of Rs. 10.77 lac Cr revenue outgo on Interest payment is Rs. 3.19 lac cr, which is a avoidable expenditure if sufficient revenue is generated by efficient management of National resources.


India’s Non-tax Revenue has been estimated in the Budget as under

2. Non-Tax Revenue




Interest receipts
19734
19578
20125
19231
Dividend and Profits
47992
42624
50122
50153
External Grants
2673
2173
3477
2887
Other Non Tax Revenue
147107
59891
49909
91207
Receipts of Union Territories
1097
1169
1105
1136
Total Non Tax Revenue
218602
125435
124737
164614

Our concept is that the Non-tax Revenue can be increased substantially if our National assets, indicated hereafter, are managed properly, intelligently and honestly.  Increase in Non-tax revenue shall gradually eliminate the need to levy taxes on the public.

It will be naïve to expect that such transformation of finding alternate sources of income can be found within one year.  Hence, we propose to achieve this target in ten years i.e. raising ten percent income from alternate sources every year and reducing ten per cent Taxes every year. After ten years people can be rid of paying  taxes of any kind totally.  Will it not be a revolution!!!

This noble objective can be achieved by working on three fronts simultaneously,namely -
I) By raising revenue from managing national assets properly, efficiently and honestly
ii) By cutting wasteful expenditure, (e.g.huge cost incurred on recovery of taxes will be saved.)
iii) By making Government purchases at fair prices. 

It is a well-known dictum that a Rupee saved is equal to a Rupee earned. 

Now a brief description of our vast national assets:
India is a vast country having a land area of 3,287,263 km2  and a long coast line on east and west  side (India's coast is 7,517 kilometres (4,700 mi) long;).  Its National Assets include, amongst others,:
  1. Land
  2. Mountains, (the Himalayas, the planet's highest mountains), Hills and Valleys
  3. Forests, Deserts (vast Thar Deserts,)
  4. Seas and millions of sq kms of sea bed
  5. Numerous Rivers
  6. Lakes
  7. Minerals of various kinds
  8. Oil and Gas Reserves
  9. Airwaves (2G, 3G, 4G etc.) 
  10. Telecommunication
  11. Railways - largest network in the world
  12. Roads
  13. Airways - (Air India was once a national pride, earning huge income, now turned into a sick baby)
  14. Waterways
  15. Real estate owned by various Government establishments – Land, Buildings, warehouses, Hotels, resorts, etc.
  16. Public Sector Undertakings - about 250 in Nos.
  17. Lease Rights, Development Rights, Business Rights, Manufacturing Rights, Sale of FSI, etc.
  18. Power Generation Plants, Dams
  19. Etc.
(The list is only indicative and not exhaustive)

These assets, if managed properly, efficiently and honestly,  have potential to generate huge revenues year after year.  As is well known, unfortunately, these assets are being sold cheap either due to Ignorance or vested interest.  For example,

  1. CAG has estimated that mining rights were granted at a lower rates gifting a windfall gain of Rs.10.76 lac crores to the lessees of Coal Mines in past five years.  In other words the country could have earned more than  Rs. Two lac crores more per year from these mines.
CAG takes on coal minister, says we don’t make basic mistakes
COALGATE: ‘We are thorough’
‘CAG estimate of Rs. 10.7 lakh crore in windfall gains for Companies is notional and imaginary. Sriprakash Jaiswal – Coal Minister

‘We are incapable of making fundamental errors as being discussed in media.  Our report will make clear all doubts on fallacies being talked about.  Vinod Rai – CAG, in response

‘National Assets like Gas [ refer kg gas pages ]. iron ore mines, Coal, Lime stone quarries are all leased at very low fixed prices per kg - at say 25 paise per kg for iron ores. The companies do not pay more, when they raise the steel or Gas prices. The owners / public do not gain.’

2. The 2G licenses were granted at lower prices losing a potential gain of Rs. 1.76 lac crores for the country:

SENDING a clear message to the CBI court that the 2G spectrum allocation of 2008 is a scam and not the result of a government policy decision, the Supreme Court today quashed the grant of 122 UAS licences and allocation of spectrum to 12 private companies.

‘Even as the trial in the 2G case progresses in a Patiala House trial court in Delhi, a bench of Justices G S Singhvi and A K Ganguly held former telecom minister A Raja and his department guilty of “virtually gifting away an important national asset at throwaway prices.” The bench also slammed the telecom regulator, TRAI, accusing it of doublespeak for giving the First-Come-First-Served (FCFS) policy of spectrum allocation a go-by in the name of “level playing field” without emphasizing on transparency in allocation through an auction process.

3. The Organizers of Asian games made purchases at exorbitant prices causing an indeterminate loss to the exchequer.

 4. A PIL has revealed that purchases in Defense are being made at almost ten times the actual price. As per news being telecast on national TV channels a response to a PIL has disclosed that purchases in defense are made at about ten times the market price e.g. a truck jack being purchased at Rs. 31,000/- each - market price Rs. 3000/-,  and so on.

5. ‘Gen forces Antony’s hand with revelation
    After two years, defence minister AK Antony on Monday was forced to order a CBI inquiry into General VK   
    Singh’s allegation that an equipment lobbyist hand offered him a bribe of Rs. 14 crore…
One of the men told me that if I cleared the tranche, he would give me Rs. 14 crore.  He told me people had taken money before me and they will take money after me. – Gen VK Singh, Army Chief.


In fact,as per news reports the Defence Minister 'Was aware of Tatra scam since '09.But he chose to turn a blind eye even after Sonia Gandhi sought 'necessary action'.


It is being stated on TV channels that Tatra trucks were being purchased for a price of Rs. 1.10 Crore where as similar trucks are available at about Rs. 16 lacs - Purchasing at 7.5 times the fair price!

6. India has a large number of Public Sector Undertakings (PSUs) numbering about 250.  Some of them are:
§                    Indian Telephone Industries Limited
§                    Coal India Limited
§                    Indian Oil Corporation Limited
§                    Oil and Natural Gas Corporation
§                    GAIL (INDIA) Limited
§                    Power Grid Corporation of India Ltd.
§                    Balmer Lawrie
§                    Steel Authority of India Limited
§                    Mazagon Dock Limited
§                    National Thermal Power Corporation
§                    Hindustan Aeronautics Limited
§                    Bharat Electronics Limited
§                    Bharat Heavy Electricals Limited
§                    Hindustan Machine Tools
§                    Bharat Sanchar Nigam Limited
§                    MTNL
§                    State Bank of India
§                    Bank of India
§                    Life Insurance Corporation of India
§                    Modern Food Industries
§                    TNEB
§                    Nuclear Power Corporation of India Ltd
§                    ELCOT
§                    Bharat Petroleum Corporation Limited
§                    Air India

Bharat Petroleum

Bharat Petroleum is a leading energy company that has established global presence through sustained aggressive growth and high profitability. It is a great learning organisation and hence offers valuable products for the society.


This company is a Government of India Enterprise with a Navratna Status. Also it is a Global Fortune 500 company whose annual turnover is 1,32,670 crores.

Oil & Natural Gas Corporation

It is awarded as the Best Oil and Gas Company in Asia. It is the lone contributor of about 84% India's oil and gas. They are not only among the leading Indian companies but also a leading company of oil and gas. The highest profit making corporate of India is ONGC. It has 77% share in the crude oil production of India. The company's main activity is to explore, refine, produce, market and transport crude oil, natural gas etc.

State Bank of India

It is the largest Indian bank .It offers banking services through its wide network in India and overseas. With more than 16,000 branches it accounts for the largest bank branch network in India. It offers services like the Mobile Banking, Internet Banking, Demat Services, ATM Services, Corporate Banking, Merchant Banking, Agricultural Banking, online services like online educational loan, online SME loan and many others.

Indian Oil Corporation

It is a public sector Indian Petroleum company and also the largest commercial enterprise in India. It ranks 116 on the list of the Fortune Global 500 list in the year 2008.It operates the widest and the largest network of fuel stations in India which is about 17,606.Auto LPG Dispensing Stations are started by the Indian Oil and it helps reach Indane Cooking Gas to 47.5 million households. The company's products are diesel, petrol , Servo Lubricants etc.

NTPC

National Thermal Power Corporation Limited is the largest power company in India and has a capacity of 29894 MW with 7 gas based,15 coal based power stations and about four joint ventures. They are among the Best Workplaces for Large Organizations. Two major units of NTPC is in Orissa. The core business of the NTPC are construction, engineering and operation of power generating plants. 

In India, one among the largest steel makers is Steel Authority of India Limited. SAIL has a turnover of about Rs. 45555 crore. They are ranks higher among the top five largest profit earning Indian corporate. It is also the 16th largest producer of steel in the world. The website of SAIL gives all the required information about the Sales, Durgapur Steel Plant and other Plants and Units of the company.

Coal India Limited

Coal India Limited deals in the production of coal efficiently and hence is the leader in the energy sector.

Bharat Heavy Electricals Ltd.

BHEL is the manufacturer of power plants equipments. Also it is regarded in terms of turnover,as one of the largest engineering and manufacturing companies in India 

Some of these PSUs are called ‘Navratnas’ – pride of India, as they are performing very well and making huge profits consistently.

Loss making PSUs
Many PSUs incurring heavy losses year after year.  By leasing such loss-making PSUs to Private sector Government can convert losses into profits.

These PSUs can give vastly increased revenue to the Government supplementing its Revenues.  And this we call efficient management of national assets.

Corruption

The corruption in India can be categorized into two types:

i)         Bribes demanded by government officials for rendering service to the public.
ii)       Bribes paid by Corporates and Businessmen to politicians and senior bureaucrats  for securing huge commercial gains.  This type of corruption is causing huge losses to the country.  The businessmen pay bribes to gain multifold benefit from the Government.  It is estimated that such bribes run into about One lakh crores per annum. By giving such amount the beneficiaries  gain advantage of ten to twenty times causing a loss of Rs. 10 lac crores to Rs. 20 lac crores annually.  If this loss of income can be stopped then it will bring revenue to the country running into hundreds of crores every year. (CAG has estimated loss of about Rs. two lac crores per annum by leasing some coal mines only - Rs. 10.7 lac crores for five years)

As per International reports:
i) Transparency International estimates that truckers pay US$5 billion in bribes annually. In 2011 India was ranked 95th out of 178 countries in Transparency International's Corruption Perceptions Index.


ii) In the book 'Corruption in India: The DNA and RNA' authored by Professor Bibek Debroy and Laveesh Bhandari say that the public officials in India may be cornering as much as Rs.92,122 crore ($18.42 billion), or 1.26 per cent of the GDP, through corruption. The books estimates that corruption has virtually enveloped India growing annually by over 100 percent and most bribery is accrued from the transport industry, real estate and "other public services". On March 31, 2010 the Comptroller and Auditor General of India said that unutilised committed external assistance was of the order of Rs.1,05,339 crore.”

“The recent scams involving unimaginably big amounts of money, such as the 2G spectrum scam, are well known. It is estimated that more than US$1 trillion are stashed away in foreign havens, while World Bank estimated that 80% of Indians earn less than US$2 per day and every second child is malnourished. It seems as if only the honest people are poor in India and want to get rid of their poverty by education, emigration to cities, and immigration, whereas all the corrupt ones, are getting rich through scams and crime. It seems as if India is a rich country filled with poor people", the organisers of Dandi March II in the United States said.

A 2009 survey of the leading economies of Asia, revealed Indian bureaucracy to be not just least efficient out of Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan, Vietnam, China, Philippines and Indonesia; further it was also found that working with India's civil servants was a "slow and painful" process.

iii)  Land and property

Officials often steal state property. In cities and villages throughout India, consisting of municipal and other government officials, elected politicians, judicial officers, real estate developers and law enforcement officials, acquire, develop and sell land in illegal ways - example the infamous Adarsh Scam.

iv) Tendering processes and awarding contracts

Government officials having discretionary powers in awarding contracts engage in preferential treatment for selected bidders and display negligence in quality control processes. Many state-funded construction activities in India, such as road building, are dominated by construction mafias, which are groupings of corrupt public works officials, materials suppliers, politicians and construction contractors. Shoddy construction and material substitution (e.g. mixing sand in cement while submitting expenses for cement) result in roads and highways being dangerous, and sometimes simply washed away when India's heavy monsoon season arrives.

v)  Medicine

In Government Hospitals, corruption is associated with non availability/duplication of medicines, getting admission, consultations with doctors and availing diagnostic services. (example - NHRM Scam in UP which has already taken six lives, running into some Rs. 5000 crores)

 vi) Income tax department

There have been several cases of collusion of officials of the income tax department of India for a favorable tax treatment and relaxed prosecutions in return for bribes.

vii)  Preferential award of public resources

As detailed earlier, land in areas with short supply is relatively common with government entities awarding public land to private concerns at negligible rates. Other examples include the award of mining leases to private companies without a levy of taxes that is proportionate to the market value of the ore

 Effects of corruption

According to a report by KPMG, "high-level corruption and scams are now threatening to derail the country's credibility and [its] economic boom".

Economic Concerns

Corruption may lead to further bureaucratic delay and inefficiency as corrupted bureaucrats may introduce red tape to extract more bribes. Such inadequacies in institutional efficiency could affect growth indirectly by lowering the private marginal product of capital and investment rate. Levine and Renelt showed that investment rate is a robust determinant of economic growth. According to the neoclassical growth model, institutional variables contribute to determining steady-state per capital income levels and speed of convergence to its steady state, hence affecting its growth rate.


Bureaucratic inefficiency could also affect growth directly, such as through misallocation of investments in the economy. When a country’s economy is below its steady-state income level, higher corruption could result in lower growth, for a given level of income.

From the above it is apparent that there exist enough alternate sources to generate revenue and to cut expenditure to do away with levying taxes on its people.  The need is to change our mindset and start thinking about it in a positive manner at all levels – the public and the authorities. 

Let us resolve that next time we shall vote for only such people and parties 
that can achieve this noble objective.


Please also review our people friendly Economic Policy: 
and our concept for Federal World Government at UN: http://mka43.blogspot.in/2012/02/one-world.html

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A current example showing there are people of impeccable integrity who work in the interest of the country and also others who have no hesitation in compromising country’s interest: Can you identify them from the following report?

Economic Times 30.3.2012
‘CIL Rejects PMO Diktat on Fuel Pact
Leaves it to Coal Minister, says it needs advice
Kolkata/New Delhi

Coal India’s board again refused to abide by the instructions of the Prime Minister’s Office to commit fuel supply to power stations for 20 years by March 31, and tossed the ball in the coal ministry’s court saying it needs advice.

‘Officials said the core issue, which remains unresolved, is a clause in fuel supply  agreements (FSAs) that impose financial penalties on the state run firm if it fails to deliver 80% of the contracted quantity of coal. Coal India’s board held extensive discussions for the third time in the past time.  Company and government sources said independent directors on the board argued against the directive from the prime minister’s principal secretary, Pulok Chatterji.

“Some independent directors stressed on protecting minority shareholders’ interests.  These included aligning prices to international prices and reducing supplies to the power sector so that profits are increased.  The fuel supply agreement on the other hand will make sure CIL meets the increased coal requirement of power companies at a predetermined price,” said a CIL senior. 'If the company is forced  to import  costly coal to meet its commitments, it would be a drain on the company’s profitability”, he added.

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Eco Times 2.4.2012
‘Phone Calls, Eating Out Turn Costlier on Higher Tax
New DelhiTelephone calls, restaurant bills and other activities will cost more now with the budgetary hike in service tax rate to 12% coming into effect from Sunday 1.4.2012.  In order to garner an additional Rs. 18,660 crore during 2012-13, Finance Minister Pranab Mukherjee increased the service tax from 10% to 12%..


Household Budgets Hit by Higher Taxes - Survey
Majority of women surveyed said they are struggling with their household budget and finding it difficult to cope with the increasing cost of living, Assocham has said…”Hike in excise duty will impact the day-to-day life of the common man”…

2 comments:

  1. my wish is curruption free india

    ReplyDelete
  2. like other honest citizens of my country, my wish is also to see a corruption free country. whatever mentioned here is true and very simple to achieve if implemented with honesty and integity. yes our country is not at all in shortage of honest people, only thing is they are not the one who forms policies. and kindly also suggest the ways to improve education system in our country. the gap of rich and poor students is increasing a lot. way we have in our country education as a business and depending so much on western concepts is shameless. i request you all to come with brilliant ideas of saving education system. this will help our kids to transform this rich nation to become true power. and is there anyway we can get rid of such widespread materialism in our day2day life also. how can we all bring back our respect which this nation truly deserves due to it's ancient history of civilization. just blaming politicians and bureaucrats is not enough. yes but it's true they are the one forming policies, drafting and implementing lame laws. and please let us all knows ways through which we can save our farmers from committing suicides daily.there's a lot to be done, but initializing it from somewhere is very important. i am really grateful to u all, for showing this very effective and pain relieving policy. hope by all our sincere efforts we achieve this and make our country truly shinning and vibrant.

    ReplyDelete