[PDF]BLACK MONEY

TOP tax syste m TOP tax syste m




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All Economic ills - one pill

TOP Tax system




Eliminate Black Money



Black money can be totally eliminated if a new tax system called TOP Tax system is
adopted and implemented by all nations.

Excerpt: - We all know that black money is being generated by tax evasion through
unreported/shadow/hidden accounts and also by corruption and fake currency. Tax evasion is
being caused by the indirect result of high tax component on commodities and services, multiple
taxes, complex tax structures, cumbersome accounting and auditing. In the present economic
system, there is huge money in physical form (bills/notes). For example in India, there is an
estimated physical currency of 10,72,020 crores with the public out of total money supply of
77,25,560 crores excluding fake currency in the economic system (As at 2012 - June 29 ). This
physical currency is about 13.8% of the total money supply in the economic system. The
percentage of physical money may vary from country to country. There are reported to be
plenty of cases of lootings, robberies, homicides, extortions, ransoms, and bribes across the
world in almost all nations because of this huge money in physical form. This physical money,
in huge amounts, is being transferred from one hand to other eluding all tax nets in
transactions of commodities or goods. The unaccounted GDP is said to be too heavy and
varies from country to country depending upon the corruption level that exists in that
country. In addition to this black money there are also huge amounts of fake currency that
has contaminated the genuine currency. The combined effect of the black money and fake
currency is playing havoc with economies of many countries. Now money is being treated as
an income generating asset and wealth instead of using it as a medium in exchange of
commodities, goods, services, and shares, physical and intellectual works. The huge
accumulation of money in few pockets in the form of black money is making the cyclic
circulation of money in the economic system to be erratic (some times more cycles per year
and some times less cycles per year) with stagnation/non usage of money causing economic
recession at times.

In the suggested TOP Tax system 99.7% of the money supply available in the
economic system will be in dematerialised (non-physical) form in the accounts of citizens,
Governments and companies. Only small portion of money, equalling just 0.3% of the total
money supply in the economic system, will be in physical form i.e. currency notes or coins.
Under TOP Tax system the value of the limited paper currency should be equal to the value of
the [GDP of that country - (exports - imports)] divided by 365. ( If GDP = private consumption
+ gross investment +government spending + Exports - imports ). This limited paper currency
equalling to 0.3% of the total money supply in the economic system would be more than
sufficient if we assume that the average each day consumption of total GDP can be bought by
physical currency alone. (100/365 = 0.273). In real terms the low valued commodities or
services like, vegetables, fruits, milk, edibles, papers etc., which ought to be bought by
physical currency, constitute about 30% of total value of the GDP. In the TOP Tax system all
higher valued commodities or services will have to be bought through debit cards, cheques,
demand drafts or online cash transfers because of both limited paper currency and restricted
monthly cash withdrawals from their accounts. That means even this 0.3% physical currency



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All Economic ills -one pill «- ,

TOP Tax system Y



is more than thrice than actually required. So the retail sellers, street vendors, hawkers,

salespersons, who rely on physical money for their business, would not be disturbed.

Every year additional physical currency, equal to 0.3% value of the growth rate of the GDP

and additional currency equal to mutilated and torn notes, can be inducted into economic

system through government spending.

Every person will be allowed only limited withdrawal of cash from his /her savings or

earnings from his/her Main Savings Account even though he/she has huge amount of

earning/savings.

Other than cash withdrawals, he/she has to spend, invest or donate his/her earnings through

debit cards, cheques, demand drafts or online cash transfers.

The monthly cash withdrawal limit for each citizen can be calculated as follows; - The value

of the [GDP value of that country - (exports - imports)] divided by total number of MSA's

divided by 12 (months) [GDP / MSA's / 12]. Please not that each citizen above age of 15

years will have only one Main Savings Account (MSA). The monthly withdrawal limit (cash in

physical form) will vary from country to country depending upon its GDP value.

For example in India, the parallel economy being run by black money almost equalling the

accounted GDP of the country and huge volumes of fake currency will be totally eradicated

with the demonetisation of higher value currency notes (Rs 1000, 500, 100, 50 notes) in the

suggested TOP Tax system paving way for corruption free society.

This paper vividly explains how black money can
be totally eradicated by using TOP Tax system.
Read full article



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All Economic ills - one pill

TOP Tax system




Tax Reforms - Taxes without
tax laws



Ultimate Tax Reforms to eliminate black money, tax evasion, corruption and fake
currency. All Direct and Indirect taxes accompanied by tax laws, accounting, auditing
and tax returns, can be abolished if a new tax system called "TOP Tax system" is
adopted and implemented by all nations. Ultimate Tax reforms will relieve 7 billion
people of the world from the cobweb of ambiguous and complex tax structures,
plethora of tax laws, mandatory and cumbersome accounting, auditing, tax returns and
consequent quagmire of all tax related cases.

Salient features of this new tax system

Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to

various ministries or departments and money supply into the economy are unified and

integrated in the banking system. In this new tax system there will be no Direct taxes,

Indirect taxes, tax laws, tax returns, tax collection departments, tax enforcement

agencies and tax tribunals. Citizens need not maintain separate account books and

submit tax returns annually for paying either Direct taxes on personal incomes or

Indirect taxes while running business or industry. Yet, the tax revenues collected by

banks from single tax called TOP Tax will be 30 to 40% more when compared to total

tax revenues accrued from all taxes in the present tax system.

TOP Tax system" will make budget preparation of any country to be simple, easy and

time saving exercise.

100% tax collections without tax collection departments.

There will be no tax collection expenditure for the Governments and no tax compliance

cost for the people.

There will be no check posts, way bills, accounting, auditing, tax laws, tax raids, etc.,

Tax component on any commodity or service will be less than 11%, unlike more than

30% in the present tax system. The prices will be substantially decreased

There will be no tax evasion and its main product black money.

Key words - Tax reforms; money supply; monetary system; banking redefined; limited

physical currency.

It




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1
All Economic ills - one pill

TOP Tax system




By VIJAY KRUSHNA VARMA

I am suggesting new methods, models, and innovative and
alternative policies in the areas of monetary system, budget preparation, banking finance
system, public finance, optimal taxation, tax collection, tax compliance, subsidies, money
supply, and fiscal policy to help remove corruption, tax evasion, economic recession, black
money, fake currency, ransoms, robberies and societal inequalities. In my opinion, the
proposed new economic system may usher in good governance, 100% tax compliance and
corruption free environment. It suggests a single tax called "TOP Tax" (Transfer Qy Purchase
Tax) for both Centre and States combined in place of present multiple Indirect taxes with
different slab rates on different goods/commodities/services and multiple Direct taxes with
different slab rates, to relieve 7 billion people of the world from the cobweb of ambiguous and
complex tax structures, plethora of tax laws, mandatory and cumbersome accounting, auditing,
tax returns and consequent quagmire of all tax related cases. Taxation, tax collection, tax
enforcement, tax compliance, allocation of revenues to various ministries or departments and
money supply into the economy are unified and integrated in the banking system. Citizens
need not maintain separate account books and submit tax returns annually for paying either
Direct taxes on personal incomes or Indirect taxes while running business or industry. This
new economic system involving a new tax system without multiple taxes, tax laws, tax
collection departments, tax tribunals and tax enforcement agencies, envisages 20 to 30 %
more revenues than presently accruing from multiple taxes collected by different tax collection
departments/agencies. The availability of resources and capital flows, needed for economic
recovery, is the self-priming character of the "TOP Tax system" without Government's fiscal
stimulus packages. This new economic system shall be operated by banks at minimum
operating cost with limited paper currency (0.3%) and dematerialised money (99.7%) of the
total money available in the economy in the particular country, thereby totally eliminating
black money, tax evasion, fake currency, corruption and extortions.

Under this new taxation system the tax net, cast by banks, will be the broadest with
absolutely no tax evasion, making it possible for the lowest tax slab rate and the cheapest
prices of commodities/services. The redistribution of revenues from Government to people in
the form of welfare schemes, subsidies and various relief funds will become easier without
leakages, bribes and misappropriation. Although this new taxation system is a basic model
suggested mainly for India, the basic concept of taxation, tax collection and tax compliance
methods can be adopted and implemented by all the developed and developing countries alike
to benefit 6.9 billion people of the world in all spheres of their lives in one form or the other.
This article contains eight parts: - —

1. Tax structure and direct benefits of the TOP Tax system.

2. Method of implementation of TOP Tax system.

3. Limited paper currency.

4. Money supply and monetary policy

5. Operating cost of the TOP Tax system.



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All Economic ills - one pill
TOP Tax system



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6. Comparative study of Tax revenues between present system and the
proposed TOP Tax system.

7. Advantages of TOP Tax system.

8. Summary of TOP Tax system

1. Tax structure and direct benefits of the suggested TOP Tax system
Tax structure of suggested TOP Tax system



Present system
Direct/Indirect
taxes(Centre and
States)




Suggested TOP Tax system
(for Centre and States
Combined)


suggested
slab rate


1. Income Tax

2. corporation Tax

3. capital gains Tax

4. wealth Tax

5. Securities

transaction Tax

6. Central Excise

duty

7. Customs duty

8. Service Tax

9.Sales tax/VAT by

States

lO.Stamp duty

11. land revenue

12. Professional

Tax

13. State Excise

14. octroi

15. surcharges and

other cess

16. Property Tax

17. Gift Tax

18. CST


1


5+6+8+9+10+12+14+15+17+18=
Transfer Or Purchase Tax
(TOP Tax)
for States and Centre combined

Slab rate = 4%


4%


2


1+3+4=

Profit tax (Totally avoidable)

for States and Centre combined

slab rate=30%


30%


3


Corporation Tax by Centre
(optional)

Slab rate=20%


20%





















There will be only one mandatory tax called TOP Tax with single slab rate(4%) for both Centre
and States combined in the proposed TOP Tax system. The Profit tax in place of present
Income tax and capital gains tax will be account basic and totally avoidable unlike individual
basic and compulsory in the present system. For clear understanding please see table number
1 and 2 in page number 6 and 7. Profit tax means it will be imposed on person's incomes (if



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All Economic ills -one pill «- ,

TOP Tax system Y



remained any) earned/got through salary, remuneration, business, industry, donations and
gifts after liberally used on expenditure/spending, various investments, gifts and donations. In
the present system, personal Income tax is levied on incomes earned/got through salary,
remuneration, business, gifts, donations and sale proceeds (however with some exemptions)
before used on expenditure/spending, donations and various investments. Under proposed
TOP Tax system the Corporation Tax and Custom duty/Import duty can be levied by the Central
government as usual to save small scale and domestic industries respectively. Similarly the
excise duty on liquor and wines can be levied by the State governments as under the present
system to inhibit heavy consumption and addiction.
Direct benefits of the suggested TOP Tax system

Under proposed TOP Tax system there will be no Income Tax and other Direct taxes.

Benefits:

So under suggested TOP Tax system, people who have taxable incomes got from salary/

remuneration/professional income/donation/gift/service/business/industry will benefit as they

need not pay Income tax/other Direct taxes and submit Income Tax returns annually. 7 billion

People of the world will be unshackled from all Direct taxes, tax laws, tax raids, tax returns,

accounting and auditing.

Under suggested TOP Tax system there will be no Sales Tax (VAT), Central Excise Duty

(CENVAT), Service Tax and all other Indirect Taxes .

Benefits:-

1. Markets will be fully open without any hurdles like multiple taxes, permits, licenses, way
bills, accounting, auditing, tax returns and tax laws. Traders, manufacturers, transporters,
dealers, retailers, vendors, contractors, service providers and all others will not need to
maintain account books, sales lists, stock lists, way bills etc. No accounting, auditing and tax
returns will be required for individuals who run business or industry. The present day trade
barriers between manufacturers and consumers; between the States within the country and
between the nations can be totally removed.

2. Therefore all the check posts, within a TOP Tax system" implemented country, can be
totally removed allowing free movement of industrial goods/commodities and agriculture
produce from anywhere to anywhere in that country and benefitting all farmers,
manufacturers, traders and more importantly the consumers.

3. The entire truck owners will benefit as they need not pay bribes at check posts. They need
not carry way bills while transporting industrial goods and agriculture produce from one
place to another place in that TOP Tax system implemented country.

4. The entire farming community will benefit as they can transport their agriculture produce
from anywhere to anywhere and sell their produce at market prices.

5. There will be no tax collection expenditure for the Governments and no tax compliance
costs for the people. Yet, the tax revenues from single tax (TOP Tax) will be 30 to 40% more
than the total revenues presently accruing from all Direct and Indirect taxes collected by
multiple tax collection departments at huge expenditure for both States and Centre
combined.

6. The tax component on any commodity, product or service will be less than 11% while the
average tax component is more than 35% in the present tax system.

7. There will be absolutely no scope for tax evasion and it's by products namely black money
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