Ramdev gives tax sermons

Gives new twist to debate on abolishing direct & indirect taxes, moots sector-wise banking transaction tax slabs

Yoga practitioner Baba Ramdev on Thursday said the debate on abolishing all direct and indirect taxes by proposing a banking transaction tax (BTT) with different slabs for various sectors was actually his idea. The Bharatiya Janata Party (BJP) might be divided over the proposal, but Ramdev said the saffron party had only given an in-principle approval to his proposal.

Much like the proposals by ArthaKranti, a Pune-based economic think-tank, Ramdev also wanted the government to do away with all central and state taxes, barring customs duty, and demonetise big currency by withdrawing Rs 500 and Rs 1,000 notes from circulation.

Holding a ‘select’ media briefing, the yoga guru, however, differed with ArthaKranti on having a single BTT and said it was not practical to have only one or two per cent tax on transactions. Instead, he wanted five to seven slabs for different categories such as manufacturing, trading, retailing, services, luxury, liquor and tobacco. His scheme would fetch the government Rs 15 lakh crore to Rs 30 lakh crore, Ramdev claimed.

He had a solution for tax devolution as well. According to his plans, of total tax collections, 40 per cent each could go the Centre and states, 18 per cent to local bodies and 2 per cent to banks.

Currently, the central government alone gets about Rs 7.5 lakh crore as tax revenue, whereas states separately get Value Added Tax and sales tax and over 31 per cent of the divisible tax pool. Ramdev claimed the average tax burden would come down to 20-30 per cent from 60 per cent at present if his proposals were implemented, but it would not result in a revenue loss to the government. He wanted to keep labourers and farmers out of the tax net and recommended higher tax on sin goods like tobacco and liquor.

“We want simplification and automisation of taxes. Political will is required for this. The BJP is willing to consider our proposal. We will make it a big issue in the forthcoming Lok Sabha elections,” Ramdev said, adding he said spoken to BJP president Rajnath Singh and Leader of the Opposition in Rajya Sabha Arun Jaitley. He was also in touch with former BJP president Nitin Gadkari, who had come out with a similar tax idea.

The government might not have yet achieved success in introducing the Direct Taxes Code and the Goods & Services Tax (GST) after years’ of planning and discussions, but Ramdev was confident his proposal, which was “better than GST as it ends a parallel economy and brings down inflation”, could see the light of the day in just one year.

He suggested a three-phase implementation of the proposal. In the first phase, demonetisation of big notes would happen to check black money and the process would not take more than six months, in his opinion. In the second phase, banks would strengthen their branch network so that more and more people had bank accounts, which would be the basis of most transactions according to the proposal. Currently, only 50 per cent of the country’s population is banked. In the third phase, he proposed a voluntary disclosure of income scheme, though it might be difficult to go for it legally, as of now.  

The three phases would take a year's time to get implemented. That would be the  time when the system would be ready to experiment with his idea. Tax experts might scratch their heads, but Ramdev sounded confident that he had given a perfect recipe for removing the ills of black money and the ‘irrational’ tax system.