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The Bharatiya Janata Party (BJP) appears to be divided over proposals that suggest scrapping of all taxes and replacing these with a single banking transaction tax.
The party has decided to study the proposals further and see if a consensus emerges.
The party’s prime ministerial candidate, Narendra Modi, had on Sunday promised to reform the taxation system if voted to power.
Those keen on the proposal to remove taxes of all kinds have found a strong supporter in the Leader of Opposition in the Lok Sabha, Sushma Swaraj. The senior BJP leader is believed to have termed the proposal “fantastic” and needing only “willpower” to be implemented.
The taxation proposals were developed by a little-known Pune-based economic think tank, ArthaKranti. A proposal suggests that all central, state and local taxes be scrapped. Only import duty would be levied. Every transaction routed through a bank would attract a two per cent bank transaction tax, it said. ArthaKranti’s proposal also suggested a ban on all currency notes above Rs 50 and restricting cash transactions to Rs 2,000. Transactions of larger amounts would be through a bank.
Differences within the senior leadership of the party emerged on January 2, when a meeting was held at senior party leader Lal Krishna Advani’s residence. The meeting was called to discuss this proposal and was attended by Swaraj, former BJP president Nitin Gadkari, Leader of the Opposition in the Rajya Sabha Arun Jaitley, former finance minister Yashwant Sinha and BJP member Subramanian Swamy, among others.
“Swaraj said it was a fantastic proposal. She said we only needed willpower to get it implemented,” said a senior party member who attended the meeting. “I was aghast that the top leadership was even discussing such a proposal.”
At the meeting, Swaraj, Gadkari and Swamy were believed to have endorsed the tax proposals. Sinha and Jaitley opposed these, arguing that withdrawing state taxes would be opposed by the state governments. Further, Sinha argued the proposals were regressive and would spread panic among people.
Gadkari said over telephone from Nagpur: “Swaraj supported the proposal. But Jaitley had some reservations on how practical some of the suggestions were, like whether states would be comfortable giving up some of their powers.”
He said the proposals were being studied and would soon be sent to the BJP’s parliamentary board.
Gadkari and Swamy have been vocal advocates of the no-tax proposal and were behind organising the presentation at Advani’s residence. Earlier this week, Gadkari had even given a presentation on the proposals to select journalists. He said he had been discussing the proposals with various groups.
FREEDOM FROM TAX
What Pune-based think tank ArthaKranti proposed:
- Complete withdrawal of taxation system
- Retain only Customs and import duties
- Impose a bank transaction tax of 2%
- Withdraw currency notes over Rs 50
- Make legal provisions to restrict cash transactions up to Rs 2,000
