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Wait a second, the ignorant might say: not all monetary transactions go through the banking channel. So a lot of people, especially those who deal in black money, will go untaxed. Similar experiments in South America show that people opt out of the banking system whenever such a tax is levied; they even gave a name to the phenomenon: disintermediation. Such loopholes haven’t been overlooked by the learned one. Ban all cash transactions above Rs 2,000, he says. But only 50 per cent of the country’s population is banked at the moment, the ignorant might persist. But what are the banks there for? Get them to expand till they cover every man, woman and buffalo in the country. Bank expansion is actually that simple. Wonder why they never thought of it.
Most of us will rejoice once income tax gets axed. The only problem here is that income tax is progressive: you pay more as your income goes up. There are slabs for different categories. But the learned one hasn’t forgotten slabs — the most important point in the whole debate. That’s why he wants six or seven different slabs for the banking transaction tax: one each for manufacturing, trading, retailing, services, luxury and liquor and tobacco. The highest rate of 30 per cent would apply to the sin sectors of liquor and tobacco. Where will you slot ITC? Or Nokia: manufacturing or luxury? These are mere irritants which can be ironed out by bureaucrats and lesser economists.
It is another great idea whose time has come. The learned one’s sage counsel has found takers in BJP. With his massive following in middle India, the party can hardly afford to disagree with the learned one. BJP heavyweights like Rajnath Singh, Arun Jaitley and Nitin Gadkari have been adequately briefed on the subject. The last named has, in fact, already expressed his support to the radical, but farsighted, proposal. Everybody panned it; but then most people first thought Isaac Newton was mad.
Tax reform is just one part of the learned one’s reform agenda. Nothing draws his ire more than black money. In 2010, he had suggested that the government should replace the existing currency with a new one — all the black money stashed away in watertight vaults abroad will come back. He had estimated that as much as Rs 300,000 crore is the extent of unaccounted Indian money. He subsequently told this newspaper that 30-40 per cent of this money is outside, while the rest is in India, “invested in gold, mining, real estate, infrastructure and Naxalism et cetera”. Foreign investment, he had thundered, “is a key source of black money”. There is a slight tweak in the prescription now: ban all currency notes of Rs 500 and Rs 1,000. The simple and elegant logic is that people can’t take a bribe of Rs 100 crore in Rs -20 notes. It would be a good idea to ban extra-large trunks as well.
