This question generally comes with a claim that ‘farmers or poor do not have to pay taxes today‘, which is a big misconception. So let’s see what are tax implications for farmers & poor today and post Arthakranti!
First of all, according to Arthakranti proposal, for poor there is a legal provision of transacting in cash, upto certain amount (say Rs. 2000/-). And there is no tax on these small amount cash transactions, which can be easily done in smaller denomination like Rs. 50/- or below. So Arthakranti does NOT add tax burden to the poor at all.
And then there is a BIG misconception that poor or farmers do not pay taxes today in our country.
- Please note that poor do not have to pay income tax, that is correct.
- But income tax is not the only tax in our country, in fact income tax or direct taxes are not even half of total (central + state) tax collection in India.
- There are indict taxes, like excise duty, service tax, sales tax (state VAT) etc. These indirect taxes are anyway recovered from end consumer, hence paid by the poor as well!
- Except for direct farm produce, the proportion of indirect taxes in prices of commodities is significant, ranging from 10% to 40% on majority of common man’s commodities. For instance, about 50% of the component in petrol price is tax!
- So whoever consumes (including the poor and the farmer), pays indirect taxes, which are included in the prices of commodities
- On an average it can be safely assumed that 20% of consumption expenditure is going in paying indirect taxes
- Hence if you compare total taxes paid even by farmers today, those are high. Assuming farmer/poor will do each of his transaction through bank still with Arthakranti’s bank transaction tax proposal, in fact the burden is going to reduce, as one can see in comparison given below
This comparison is considering BTT rate as 2%, however as Arthakranti proposal is implemented completely, with merging of parallel economy in white economy, the required rate of BTT might come down below 1% and then see the comparison.
About poor/farmers transacting through banks:
- Post Arthakranti, they may also want to transact through banks, because there would be benefits attached to it like having better credit history, which would help them to get loans easier and cheaper, then safety of transactions, ease of transactions with mobile phones etc.
- Though today there is no adequate bank infrastructure supporting this, Arthakranti implementation will happen over some time, may be 2-3 years.
- The existing technology today supports wide spread of banking, based on which RBI has set up goals like bank account for every adult by 2016 etc. So whether for Artharkanti or otherwise, bank infrastructure is going spread widely.
- If country like Kenya can bring about revolution through mobile banking, why we cannot in India?