A NEW TAXATION REGIME
Generally taxation is a system, which most countries impose on their residents, to collect money to run the government and provide civic amenities and other services to the people. In most cases, it is the primary source of income for the government.
Taxation is a very effective system and like all effective systems has been invented by the Mesopotamian Babylonians, for smooth conduct of the government and society. But, like all systems which are effective, it can be distorted and corrupted. Many governments and people have corrupted and distorted this system for their own nefarious advantages. A prime example of this is the Jazia tax, which was imposed by the Arabs on people they conquered and refused to convert to Islam. You can say that it was a sort of economic sanction, much before the United States of America reinvented it in the post cold war era.
Overall Taxation is an effective means of collecting revenues, to provide services to the people and run a country. In most cases it is a certain percentage of the income of an individual or corporate entity or business. Generally that percentage is in the form of slabs, with income (both individual and corporate) being categorised into groups and each group levied a percentage as Tax.
For example, a government can divide the individuals and corporations into groups A, B, C, D, E……etc. as follows
Group A: Income or Corporation with net earning upto Tannar 100,000
Group B: earning between 100,000 to 200,000 Tannar
Group C: earning between 200,000 to 500,000 Tannar
Group D: earning between 500,000 to 1000,000 Tannar
Group E: >1000,000 Tannar
Having divided the earners into above groups, it can give Tax rebate upto a certain earning, lets say 10,000 Tannar, than 10% tax until 100,000 Tannar.
In the case group A will not pay Tax on its first Tannar 10,000 but if earns Tannar 90,000, it will pay 10% Tax.
Thus, Group A Taxable income comes to 90,000-10,000 = 80,000 Tannar
10% of Tannar 80,000 is Tannar 8000
Thus, an individual or corporation earning Tannar 90,000 will pay Tannar 8000 in the above case.
Next the government can levy 15% tax between 200,000 to 500,000 Tannar, 20% Tax between 500,000 to 1000,000 and 30% above 1000,000.
I all the above taxation, an individual or corporation pays Tax as a fixed percentage. It is a easier method of Taxation and easier to calculate by the Taxman or Taxwoman. But it is not a scientific method and it is not justifiable.
It is not justifiable because this slab system and fixed percentage Taxation does not differentiate between people and corporations earning over a wide spectrum of earning.
We will accept that any Taxation regime cannot impose more than 20% Tax on either an individual or corporation. Above this is unjustifiable. Rightly the Mesopotamian babylonians never imposed more than 20% Taxation in their country and also the highest interest rate paid in any transaction was never more than 20%. This means that this 20% limit is not only time tested but has been used by the Mesopotamian Babylonians for millions of years of their existence. So, this 20% upper limit on both Taxation and interest rates has been tested under most rigorous financial conditions by the greatest brains in the universe and has been found to be true both for taxation purposes and Interest rate purposes. Therefore this 20% upper limit of Taxation and interest should not be exceeded. This limit gives maximum and optimum stability to the financial system.
After all the individual or corporation are working hard to earn that money and anything greater than 20% total tax is simply not viable to boost the mind to work more to earn more. So, greater than 20% taxation is simply counterproductive and forces hard and big earners to migrate to better and justifiable tax places.
But, what is the alternative to this simple but unscientific monotonous slab taxation system. It is the decimal taxation.
Let us say that in a country, you require a minimum of Tannar 30,000 to survive per annum. This includes the lodging, food, transportation and other costs to support one individual. This minimum survival requirement Tannar 30,000 should be non-taxable to all citizens. This is for an individual. Now, suppose this individual has a family with three children and a spouse. This means that the family has five members . So it will need survival money of at least Tannar 30,000 X 5 = 150,000.
Thus, for this family of five individuals, they will not pay any tax till their total or net income exceeds Tannar 150,000. This calculation can vary according to the number of family members and cost of living.
But suppose in the above case, in addition to children, the husband and wife also have to support their parents (either or both from both sides). In this case Tannar 30,000 will be added to non taxable income for each individual added.
Now, suppose the husband is supporting his mother and wife is supporting both her parents. This makes it three added individuals. That is further 3 X 30,000 = 90,000 Tannar nontaxable income.
In this case the total of non taxable income comes to Tannar 150,000+Tannar 90,000 = Tannar 240,000.
So, for this example family, they won’t pay tax till they earn above Tannar 240,000, because it the minimum they need to sustain themselves. This is their basic requirement and cannot and should not be taken away by any Taxation System.
The evaluation of cost of living can be done by an independent body or government body for each year.
This is the basic standard of the new Taxation regime for individuals.
But what about corporations. Similar to individuals, corporations also have to sustain themselves. This includes expenditure on raw material, salaries, transportation, storage etc. This is the survival requirement of a corporation and cannot be taxed. Thus, each year an independent body will asses as to the cost of these requirements and total it up for each corporation. This basic survival requirement of a corporation cannot be taxed. In such cases, the cost of living of the individuals serving such a corporation can also be added to the survival cost of the corporation.
For example if a steel producing corporation is spending Tannar one million for raw material, another Tannar 200,000 on salaries, Tannar 100,000 on Transportation, and Tannar 300,000 on other requirements like power etc. and employs 100 employees who need Tannar 30,000 each for sustenance, than the total survival cost of the corporation can be calculated by summing all the above.
1000000 + 200,000 + 300,000 + (30,000X100) = Tannar 4500000
Thus Tannar 4500000 is the survival requirement of the above example corporation.
After the basic survival requirements have been determined for both individuals and corporations, this has to be deducted from the earning of those entities.
Next is what sort of slab system or taxation should be put forward.
In my “A New Taxation Regime”, there are no big slabs. That is the Taxation system is not divided into groups as given in the example. Rather it is a continuum till the maximum Tax limit of 20% is reached in extreme cases. I will advice that a society where more individuals can be taxed is much better than a society where some individuals are taxed at high rates.
In my slab system, the slab gap is very small, say Tannar 1000 and the Tax on each slab is maximum of only 10%. This is the simplest form of my slab system. In a more complicated system, different number of slabs can be taxed at different rates, For example, first 1000 Tannar 1000 slabs can be taxed at 4%, second 1000 Tannar 1000 slabs can be taxed at 4.1 %, next Tannar 1000 slab at 4.2% and so on. Thus in a continuum, each Tannar 1000 slab can be taxed at a different rate.
In the above family example, suppose the total earning of the family when it has to support five members is Tannar 400,000. The survival requirement for such a family comes to Tannar 150,000. This means that the total taxable income becomes Tannar 400,000-150,000 = Tannar 250,000.
Now in the most simplest tax slab system, each Tannar 1000 slab can be taxed 10%.
Because Taxable income is Tannar 250,000, so there are 250 Tannar 1000 slabs in the taxable income.
The family tax is calculated as:
(10/100 X 1000) X 250 = Tannar 25000
Thus in the simplest form, a family with survival requirement of Tannar 150,000 and total income of Tannar 400,000 will pay a tax of Tannar 25000.
Lets make the Tax Slab system more complicated as described above:
The first 1000 Tannar 1000 slab (of the 250 Taxable Tannar 1000 slabs) will be Taxed 4%. Since this family has no more tax slabs, the Total Tax calculated comes to:
(4/100 X 1000) X 250 = Tannar 10000
Thus in the complicated system if the family earns Tannar 400,000, it pays a tax of Tannar 10,000
Suppose the family as given in above example is supporting three other members, the survival amount comes to Tannar 240,000 and consequently it pays no tax.
Suppose this extended family of eight, with survival requirement of Tannar 240,000 has a total earning of 280,300 Tannar.
In this case 280300-240000 = 40,300 Tannar.
In this case as calculated above, the Taxable income is Tannar 40,300. Now we see that it has 40, tanner 1000 slab
So Tax calculation comes to:
(10/100 X 1000) X 40 = Tannar 400
So this family pays Tannar 400 as Tax. The Tannar 300 , which does not form a Tannar 1000 slab is non-taxable.
But suppose if the family was earning 10000000 Tannar. The survival requirement is Tannar 150,000. Taxable income becomes Tannar 8500000. In this there are 8500 Tannar 1000 taxable slabs. The first 1000 Tannar 1000 slabs are taxed at 4%, the next 1000 Tannar 1000 slab is taxed at 4.1% , the next 1000 Tannar 1000 slab is taxed at 4.2 % , the next at 4.3%, the next at 4.4%, the next at 4.5%, the next at 4.6%, the next at 4.7%, the next at 4.8%
Calculating the Tax as described above, this family by this complicated system has to pay a Tax of Tannar 318,000
But, this Tannar 1000 Tax slab is according to Tannar currency. In different countries and different currencies, this slab can differ. It can be Slab 250, 500, 1000, 10,000, 100,000 etc. but the method of calculation remains the same.
Also the 10% Tax regime can vary but ideally should not be above 20% for either corporate or individual.
Similarly every entity in a society can be divided into either individual or corporation, given a unique Tax number and taxed as above. Thus there will be no need for any service tax, custom tax etc. as every entity in a society can be divided into either a Tax individual or a Tax corporation for the purpose of Taxation. This will ultimately curb corruption and enhance fair play in the society.
This “New Taxation Regime” allows for sustenance and maintenance of all individuals in the society, encourages support of family life, encourages support for elderly, encourages support of a loving society. This justifiable system encourages people to pay their taxes.
Further in this “A New Taxation Regime”, Tax deduction at Source is totally abolished because nobody, not even the government has any authority to take your hard earned money without your permission.
Further all the survival slabs and Taxation slabs can be put in a Taxation software.
Each individual and Corporation should be assigned a unique Tax number. Each individual or corporation must log on to the Tax portal between Tax dates and fill their total earning and family members (along with their unique Tax numbers, even for children). The Tax software will calculate the and will inform the logger of its attached E mail account and Phone number. The individual or corporation can pay their Tax either online or by depositing a cheque in the Tax account.
For this the government must maintain a Tax account. The cheque will quote the name of individual or corporation and its Tax number.
In this way Tax can be collected for all individuals in a society and society can be supported as a whole.
A “Tax regulation Team” should be in place to examine cases where it is suspected that the individual or corporation has not declared its income truthfully.
In the New Taxation Regime, there is no provision for imprisonment. The logic is that the individual or corporation has earned the money. A Certain fine can be levied for false declaration of income to discourage people to resort to false income claims.
Thus the New taxation Regime proposes to make Taxation a society oriented entity as was envisioned by its Mesopotamian Babylonian inventors. It is not a tool to harass people but is a system to bring financial stability to the society and the country.
Lets start fair taxation
lets do away with corruption
let the family survive
let business grow
Than only taxation is justified
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