The much-awaited White Paper on Vat has brought nothing new. In fact, in the name of simplifying things, they seem to have become more complicated. The crucial issue before trade and industry was that Vat laws, rates and regulations should be same across all states. But this White Paper clearly says that states have the freedom to fix the minimum threshold limit for dealers and also vary tax rates.
Moreover, states have the discretion to keep 10 commodities of their choice exempted from Vat. This will lead to excessive lobbying to seek Vat exemption.
Moreover, the decision to keep textiles and sugar outside the Vat regime is silly.While on the one hand we talk about giving freedom to our textile industry to face the post-quota export regime, on the other hand we wish to keep them out of Vat. The White Paper is also silent on whether cess on sales tax imposed by certain states would continue in the post-Vat regime.
Its shocking to know the Centre is contemplating giving states the power to impose Vat on foreign imports. This is bizarre: while we talk of lowering import duties, we also wish to impose Vat on imports. To replace a complex sales tax system with an even more complex Vat will be disastrous. Vat must be simple, have no exemptions and offer no discretionary powers to the states to vary their Vat laws.
At last, the Election Commission (EC) appears to have attained nirvana. The proposal of a negative vote is just what people need. The EC needs to carry the idea further. If the total number of negative votes are the highest, then all contesting candidates must lose their deposits and a re-election ordered.
There is another measure required to make us a pucca democracy. Electoral alliances must be forged during the pre-poll period only and declared, in writing, to the EC and the President/governor. Only such alliances should be allowed to form governments. At present, elections see the most ridiculous of alliances simply to enable looting the country for five years.
Also, an end must be put to the practice of supporting from the outside without joining the government. This is power without responsibility and the present central government is an outstanding example of this.
A large section of the population seeks a simplified income-tax structure and lower taxation levels. To achieve this, the tax exemption slab can be increased to those with income levels of upto Rs 2 lakh. Getting rid of unnecessary exemptions and increasing the tax-free slab will also make it easier for people who have tax deducted at source.
One often hears that savings will be tax exempt but will be taxed as ordinary income during withdrawals. In my view, it will not encourage savings. Even if such a measure were to be introduced, withdrawals exceeding say 10 lakh may be taxed, leaving fewer withdrawals tax-free.
Of course, the easiest and most simple measure would be to abolish income- tax as suggested by Subramanian Swamy.