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Eliminate black money

We all know that black money is being generated by tax evasion through unreported/hidden/shadow 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, most of the money in circulation is in physical form (bills/notes). 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. To eliminate black money it is imperative to evolve a new tax system that will not allow tax evasion and at the same the collections and tax compliance should be made at absolutely free of cost, easy and involuntary without compromising on tax revenues. This paper entitled “TOP Tax system – A common tax system for all nations” suggests a new tax system without multiple taxes, tax laws, tax returns, tax collection departments, tax tribunals and tax enforcement agencies. In this new tax 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. Taxation, tax collection, tax enforcement, tax compliance, allocation of revenues to various ministries or departments and money supply into the economy will be unified and integrated in the banking system. This new tax system will have only one compulsory tax called “TOP Tax” with single slab rate in place of present multiple taxes with different slab rates. The TOP Tax system’s tax collections (TOP Tax and Profit tax) for Government and tax payments/tax compliance by all citizens will be totally automatic and involuntary just like respiratory system in human body. Every account (MSA/SSA/CAN) will be an involuntary taxpaying account. In the suggested TOP Tax system, most of the money (99.6%) available in the economic system, will be in dematerialised form in the accounts of citizens, Governments and companies. Only small portion of money (0.4%) will be in physical form (cash) i.e. coins and notes at low denomination. Each individual will be allowed to withdraw restricted amount of money in cash form per month from available earnings or savings in his/her Main Savings Account. People will have to spend or use the remaining available earnings or savings in their accounts through debit card, cheque, DD, or online transfers. The amount of cash withdrawal per each individual should be equal to the total value of the GDP of that country divided by the population of that country above the age of 15 and divided by 12 (months). All higher valued currency notes will have to be demonetised, leaving only low valued currency notes, sufficient enough to purchase low valued commodities and services at the consumer or street level. This paper comprehensively explains how this new tax system shall be operated solely by banks at minimum operating cost with limited paper currency (0.4%) and dematerialised money (99.6%) of the total money available in the economy in the particular country, thereby totally eliminating black money, tax evasion, fake currency, corruption and extortions.

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Posted by VIJAYA KRUSHNA VARMA