Friday, July 10, 2009

New TAX system suggestion. Why I pay tax !!! And where did my Tax money go !!

Indian Taxation System

Ever wondered why pay tax to Government... And more over where does the tax money go... Government says: Pay taxes and you will get better benefits. We do get them... But it is not always transparent and not what we want and not in the time frame we need it.

Here is a new way I feel that people be taxed
(Pay for building our country stronger and better)

  1. Everyone has to pay tax. Actually I do not wish to use the word "tax" in my new proposed system. Because, ultimately, the charges levied on people, in the name of "tax", are for the support of Government. I would like to call it a "FUND", which I deposit to Government for building my own country and for my own benefits.
  2. No exemptions to any one. You can not escape paying these charges, by just submitting your savings certificates, housing/education loan repayments or even donations/charities you make, etc. [No panic, all these things are valued and paid in a different approach altogether.]
  3. Allowable exemptions. Any one who can not even afford food or even do not work (not lazy ones) are not considered.
  4. How much I invest. I have the complete freedom to choose how much I want to put in FUNDS. Suppose I would like to pay a minimum of my hard earned money to FUNDS, So I decide to pay only 10% of my income. Then I get only 10% of the benefits from the new system. Of course, there is a max. limit to it, say 30% of individual's income.
  5. FUNDS. Now Govt starts with various funds open to people, which they feel people should invest, instead of first collecting the money and then invest in building the country.
  6. I didnot understand the concept of FUNDS. I am giving you examples.

    1. Govt creates an Agriculture Fund. This is used for providing loans to farmers, research in better ways of farming, building canals, finding ways to get better crops.
    2. Govt creates Infrastructure Fund. This is used to get better Metro/Bridges/Road/Tram services in cities.

    These are not very large single funds in each sector. Each sector's Fund is sub divided based on the districts/towns where Govt is planning to implement in the current financial year/planning term. Atomic funds are created and announced to public.

    Now, I search for funds which are getting implemented in the village/city I live in and I invest in them.

    Suppose there is a metro lane to be constructed and Govt. raises a Metro Lane Fund" and incidentally the metro lane is the route I commute daily. Now, I want to invest in this fund because I am the one who is benefited if this project is finished fast.

    But this is not the case where you simply pay and stay quiet, as you do with taxes. There is a clear transparency for each and every fund and there is a clear picture of what is happening to these funds. And there is a dead line for each project. If not completed with in those dead lines, there is answerability to public. You have the right to know what is happening to your money.

    These are similar to post office funds except it is payed from the tax money directly instead of investing and then applying for tax breaks.

  1. Now out of the total tax for 20% I can decide how I want to invest. I can decide on best fund to get better returns and invest in the same. There is a time and fixed returns that I can get So I decide to invest in Farmer, Infrastructure and education
  2. How will govt be still in control :

  3. Govt can decide rules on how I can have my 20% be split on priority of the fund
    example: My 20%of tax = INR 200,000

    1. Farming/Agriculture is most important. So they say max of 10 % of my tax money or 100,000 from my tax money; which ever is lower .

    1. Infrastructure is important but more than point a. So 5 % or 50,000 which ever is lower.
    1. Education ...

    This will help govt to controls on how much any individual invests in and most important funds gets the preferences.

  4. I am happy to invest in govt for long terms because:

    • I know where my money is used in building my nation. I have a choice to invest in the area where I feel that my city/town/village is neglected.

      I know my money will be returned to me back one day. may be with less interest but at least get the principal amount.
  1. Why will this help
    a. Now I am actually giving money to build my country.
    b. Since govt is responsible to return the money back to their people they be wise.
    c. We never have to think that govt never spends the money on building nation.

    7. Now the remaining 10% of tax paid goes to other important things which are better be in control in govt.
    1. Our Military forces. Our Security forces. Police.
    2. Amount be paid to really needy people through NGO's
    3. Keeping Law and order in Order.

    8. Will govt have enough time to look in the funds that they create. May be not. So they can out source to private Indian companies which can create employments.

    9. How does people influence on building better sector ?

    Suppose I am a merchant and buys and sells edible product. then I could insist govt to have a fund to get cheaper and better raw material by letting people invest in the specific fund.

    10. Govt can make it strict rule that any one who does not pay taxes will not be eligible for any kind of loans. etc .

    Some questions that you might have:

    1. What happens if govt creates a fund and no one invest in or there is very less investment ?
    Ans: Well that means govt thinks that it is important and not people. So it was not suppose to be there in first place. So in this case it will use money on next urgent fund which is part of announcement when the fund is made.

    2. What happens if a funds get more than the required money ?
    Ans: Govt know upper limit and will stop accepting any investments when the upper limit is reached. Will encourage people to pay taxes in advance or every month rather than waiting for end of year.

    3. This will make cities better and bigger and villages will get neglected or vice versa!
    Ans: May be not as govt decides on funds which they require investments and they are not suppose neglect any one when people are ready to invest.

    4. If all the funds does not get required money ?
    Ans: That means we have too many funds and too little understanding of our priorities. I doubt this will happen.

    5. This will encourage corruption !!
    Ans: May be not because; Any one can get fund be created .. but cannot make every one pay in the fund they have made for their benefit. When it comes to money people think a lot and think right (well most of the time).

    6. Minority groups will get neglected
    Ans: In my opinion there is nothing like minority group believe me every is alone and every one is together, it depends on how they see themselves.

    Well I gave you my thoughts. I know it is not prefect and may be not at all good enough; but I would like to hear your constructive comments on this article.

    In case you feel this will not work !! Please specify a scenario or examples. your comments will help.

    Thanks for your effort in reading till end :)