The MRCM (Mine Rent for Citizens and Military) Party
Jai Jawan Jai Kisan
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MRCM’s    demands    ,    promises    to    abolish    VAT ,    service tax ; enact    wealth tax    ; Improve    taxation

Contents
  1. Summary
  2. Regressive Taxes
  3. Govt Ordinance for wealth tax for land/houses Military, Police, Courts and Strategic Issues
  4. Advantages of wealth tax
  5. Other changes in tax laws and drafts
  6. Review Questions




1.    Summary


         We demand and promise to bring following changes in Tax structure by obtaining YESes of citizens on the Govt Orders and Ordinances needed to bring following changes.
  1. Enacting Wealth tax for Military, Wealth tax for Police/Courts, Wealth Tax for Education of subjects needed by Military, Wealth tax for Strategic Defense The tax will apply on market value of land, construction by size, market value of shares and bonds, gold, silver and metal.
  2. Reduction in Income Tax, abolition of most exemptions such SEZ, exports, charities etc
  3. The religious trusts will get exemption of Rs 100 per adult member per year and Rs 50 per member below 18 with limit of at most two children. And one citizen can become member of at most one religious trust.
  4. Abolition of ALL excises except few items like vehicles (which will be used strictly for funding roads), fuel, electricity etc.
  5. Abolition of VAT , sales tax on all items including tea, coffee, tobacco, liquor etc
  6. Abolition of service tax
  7. Abolition of Octroi
  8. Reduce Inheritance (Estate) to 1%
  9. Almost abolition of stamp duty - reduce stamp duty (transfer tax) to 1%
  10. Health tax on tobacco, liquor only to cover medical subsidies given to illnesses due to tobacco, liquor etc. The tax on tobacco, liquor etc will not be used to cover any other expenses.
  11. Abolish HUFs. Incomes of HUFs will be bracketed with Karta or taxed at corporate rates
  12. No wealth tax exemption for HUF’s wealth . Wealth of HUF will be bracketed with Karta or taxed at highest rate as Karta may wish.
  13. National ID system to track wealth ownership and incomes
  14. Universal banking system to track payments and reduce evasion



2.    Regressive Taxes


         What is a regressive tax?
         Given a tax, I analyze following aspect of a tax, and classify the taxes in 3 categories --- flat tax, regressive tax and progressive tax
         In the same way, say GoI needs say Rs 10000cr as taxes. Say various members of the citizenry own properties whose total worth is Rs 10,00,000 cr. Now again, there are three ways to impose taxes ---
         Now lets analyze some taxes in India.

Tax example-1 : Tax on movie tickets
         Say a person earning Rs 3000/mo sees say 3 movies a month. Say he buys cheap tickets worth Rs 50. The tax in Ahmedabad on such tickets is Rs 20. So he pays (3 * Rs 20) = Rs 60/month as tax, which is 2% of his income. Now consider a person earning say Rs 30,000/mo. It is unlikely that he would be seeing 10 movies a month. Say he sees 4 movies a month, buy more expensive tax worth Rs 100, in which tax is Rs 40, and thus pays Rs 160/month as tax. The tax % will be = 160/30000*100% = 16/30 = 0.54%. Hence tax on movie tax is a regressive tax, regressive wrt income. What is more regressive is that in some cities of India like Ahmedabad, the tax on ORDINARY cinemas, where base price is Rs 20 and tax 80% of the base price. While for the expensive theatres (called Multiplex) where base price is Rs 100/- or even Rs 150/- or even Rs 400), the tax is barely Re 1/- per tax i.e. nearly ZERO !!! IOW, a person who can barely afford/spend to Rs 40 ends on movie ends up paying a tax of Rs. 15. While those spending Rs 100 to Rs 400 pay ZERO tax !!! This is truly a regressive tax wrt income --- the kind of tax India’s elitemen and intellectuals love.

Tax example-2 : Taxes on tea
         Consider 100cr citizens of India. Say some 60cr citizens drink tea. For the time being, ignore the remaining 40cr. Now I would divide these 60 cr tea addicts into 3 groups :
  1. those who earn below Rs 100/day
  2. those who earn Rs 100/day to Rs 1000/day
  3. those who earn above Rs 1000/day
         Now say a cup of tea uses say 10gm of tea which costs say Rs 2. Say the taxes on tea are 50% of the costs i.e. a cup of tea has tax of Rs 1. Now consider a person making Rs 100/day. Say he drinks 2 cups of tea. Hence he is paying Rs 2 as taxes i.e. 2% of his income. Now consider a person who is earning 10 times i.e. Rs 1000 per day. Obviously, such a person will not be drinking 10 cups of tea per day. Say he is drinking 5 cups of tea per day, in which case he will be paying Rs 5 as taxes i.e. 0.5% of his income as taxes. And likewise, a person who is earning Rs 10000/day will be perhaps spend say 0.05% as tea tax. So tax on tea is REGRESSIVE wrt income of a person.

Tax example-3 : Taxes on tobacco, coffee, gutaka, beer
         Consider tax on any such commodity, such as tobacco. Once again, say out 100cr citizens of India, say 40cr chew/smoke tobacco. I would divide the tobacco addicts into 3 groups
  1. those who make below Rs 100/day
  2. those who make between Rs 100/day and Rs 1000/day, and
  3. those who make above Rs 1000/day.
         Consider a person who is earning making Rs 100/day. Say he is chewing 10gm of tobacco on which tax is Rs 1. Obviously, those who earn 10 times i.e. Rs 1000/day are NOT likely to consume 10 times more tobacco. Perhaps they would be consuming 2-3 times more. Hence the individuals with lesser income are paying larger portion of their incomes on tobacco taxes. Hence taxes on all these commodities like coffee, tobacco etc are REGRESSIVE wrt income.
         Quite often intellectuals cite taxes on tobacco as "welfare-oriented" i.e. taxes on tobacco reduce consumption of tobacco and thus improve the health of addicts. This is a flat lie and shows the extent to which intellectuals can twist fact to serve their wealthy masters. The reality is as following :
  1. say a person earns Rs 100/day
  2. say he eats tobacco, tea, coffee, sugar, oil etc, which costs Rs 20 before taxes
  3. due ultra high taxes, the price of those goods is Rs 50
         Now the increase of Rs 30 does NOT decrease his consumption of tobacco etc. Even with 2 to 3 fold increase in price, he continues to consume same amount. But due to higher expenditure, he ends up with LESSER money to buy good food like milk, ghee etc. And he is left with lesser money for his cloths, and he also has lesser money for his wife and kids, and may be his parents' food, clothes and education. He also ends up with lesser money for their medicine. IOW, the regressive taxes on tobacco, tea etc DOES NOT reduce their consumption of these "bad items" but drastically reduces his consumption of "good items". This not only ruins his and his family members' lives, but deteriorate the whole economy. How? Since the person has lesser disposable income, he ceases to be consumer for a large number of goods. Hence the market for those goods shrink, which forces the manufacturer of those items to reduce production. This reduces the number of labor they can support and thus starts a negative cycle.
Effect of regressiveness in taxation
         How this "gyaan" on type of taxes --- flat, progressive and regressive --- useful in understanding problems of India? The overall taxes in US/West are much less regressive than they are in India. As a result, the poverty problem is less severe in West, and the lower class in US/West has higher disposable incomes. So they have more money to buy various goods. This has created a large internal market in US/West for various manufactured goods and services. In addition, the lower class individuals in US/West also manage to save money to buy equipment needed to increase their productivity. While due to regressive taxes, the lower class individuals in India is hardly left with any money to buy that many goods or equipment. So the market in India remains small despite large population. And lower class individuals fail to buy equipment etc to raise their productivity.



3.    Govt Ordinance for wealth tax for land/houses Military, Police, Courts and Strategic Issues


Overview
         There are many issues – how to decide market value?

DETAILS OF WEALTH TAX LAW WE DEMAND
Senior officials
  1. This wealth tax for Military will be implemented by “Tax Officer for Military” appointed by PM, who can be replaced by citizens
  2. The PM will also appoint Registrar whom citizens may replace
Registration of properties
  1. If an individual owns a flat, then land owned by him will be land owned by apartment complex will multiplied by % shares he owns in that society.
  2. Each person/company with a land or house will register his property with the Registrar. The owner will also register its area, exact location and other details as asked by the Registrar (this is already done in most cities; most municipalities already have land/building records)
  3. If the individual owns land below 75 sq meter and construction area below 200 sq meters, then tax due on him be zero. But he does need to fill the form disclosing purchase price , purchase date and year wise alterations he has made till date. No proofs for alterations will be required.
Registration of families, eligibility for becoming member of family
  1. For the purpose of wealth tax, an individual can register himself as solitaire (alone) or part of family. which ever suits him best.
  2. Family will consist of Head of the family, who can be male or female.
  3. The spouse of Head can become member.
  4. The children below 18 can become member of family with approval of both parents
  5. If the children are above 18, they as well their spouses can still become member family if they have not registered their own separate families with wealth tax dept.
  6. The parents and parents-in-law too can be member of the family unless they have separate families. And grand children of son as well as daughter can become member of family if both parents of the grand-child are members of the family.
  7. The great grand children cannot become member of family
  8. Unmarried or divorced siblings of Head can be member of family, but married sibling cannot become member of the family. The sons and daughters of sibling cannot become family
  9. One person cannot be member of two families.
  10. Persons registered as solitaire cannot be part of family.
  11. If a person has more than 3 kids, only 2 can be part of family for wealth tax purposes.
  12. If a person wants to form family for wealth tax person, he will need to register the family with list of members. The signature of adult members will be required and signature of parents of children will also be required.
Exemption
  1. The exemption limit solitaire person will be 75 sq meter of land and 150 sq meter of construction, while that for family will be [75 + 40 * (number of family members-1) ] sq meter of land and [150 + 80 * (number of family members -1)] sq m of construction area
Classification of property – personal, semi-personal and impersonal
  1. For the purpose of wealth tax, the owners can define the property as personal or impersonal or semi-personal depending on which valuation scheme suits him best.
  2. If person is Solitaire, then a group of properties will qualify as personal if
    • the property has no co-owner
    • the sum of land area of properties is below 75 sqm
    • the sum construction area of properties is below 150 sqm
  3. If person is Head of the family, then a group of properties will qualify as personal if
    • all owners of properties are family members, and none is outside the family (not every family member should be owner)
    • the sum of land area of properties is below [75 + 40 * (number of family members-1) ] sqm
    • the sum of construction areas is below [150 + 80 * (number of family members -1)] sqm
  4. There can at most one semi-personal property per solitaire if it meets following requirement
    • the solitaire person has not labeled any property as personal property
    • he is the sole owner of the property
  5. There can at most one semi-personal property for a family if it meets following requirement
  6. There can at most one semi-personal property for a family if it meets following requirement
    • all owners of properties are family members, and none is outside the family (not every family member should be owner)
    • the family has not labeled any property as personal property
    • the personal fraction in the property is exemption limit/area and impersonal fraction will be (1 – personal fraction)
  7. The owner or Head can change the label on property from personal to impersonal to semi-personal any year.
Registration of properties’ values
  1. For the purpose of the wealth tax, there will be two values of each property --- standard value and circle rate value.
  2. The standard value of a property will be (circle rate price at the time of purchase plus alterations made each year). The alterations will be as disclosed by the owner. The owner will not be required to provide any proof of alteration made, but must disclose the value of alteration made in the income tax statements as well.
  3. The circle rate value of a property will be value based on unit rates of land and construction set by Valuation Officer for that area.
Tax on the land/house
  1. The tax on properties which get qualified as personal properties will be zero.
  2. On impersonal properties, the tax rate will be 1% of higher of the two values – standard value and circle rate value
  3. On semi-personal properties, the tax rate will be 1% of lower of the two values - standard value and circle rate value multiplied by impartial fraction
On inability to pay taxes
  1. If a person does not pay wealth tax, the tax will be due on the property and an 18% per year interest will apply
  2. If the property is personal or semi-personal, then upon the death of the owner or sale of the property the taxes will be collected. There will be no confiscation
  3. If the property is impersonal, the property will be auction when the due amount crosses 25% of the value of the property
  4. The amount paid in wealth tax in one year will be deductible from the income of the next year.



4.    Advantages of wealth tax


         The wealth tax stops hoarding of the land and thus brings down the land prices. This lowers the cost of land for entrepreneurs and thus number of business increase, and so does employment. IOW, wealth tax does not discourage. And if at all it does damage to industries, it is far less than income tax or sales tax or excise.



5.    Other changes in tax laws and drafts


         In addition, we at MRCM party have proposed, demanded and promised some 200 changes in tax code. All changes are well defined, and specific. The drafts of the Govt Orders and Ordinances needed to bring these changes will be put on this webpage soon.



6.    Review Questions


  1. Consider India with 110cr citizens. Say only tax is wealth tax, for which one needs to have records of how much land/flats he possesses etc and how much alterations he did every year. Say list of alterations done take 2 page per dwelling on an average. How much is the paper work generated per years?
  2. Consider India with 110cr citizens. Say only tax is sales tax , for which one needs to keep record of every sale and purchase. On an average, say a person makes 10 purchases a week. How much is the paper work generated per year?
  3. In Sales Tax, tax can be evaded by not disclosing the sale. Can wealth tax be evaded?
  4. Will wealth tax on land result into increase in land/flat or decrease in land/flat value?


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