Better ways to minimise black money than demonetization

11/11/2016

There are better ways than monetization, to minimise black money. Some of these ways are;

1. holders of black money could be allowed to bring out black money with or without payment of taxes/penalties if they (particularly in industrially backward areas)set up factories which will give employment to certain number of people. By this scheme a number of people will get employment in construction of factory and in running the factory, transport etc . In a country where educated unemployment is large, this step will prove to be beneficial to the people/country. It will also contribute to government funds by way of licence fees, duties, taxes etc. The scheme to be successful, black money holders should be assured that no questions will be asked and no adverse publicity will be given.

2.Black money could be used for laying /widening roads, and the holders could be permitted to collect toll charges

3.Black money could be allowed to be used to construct new railway lines and run trains and/or be permitted to collect charges from those operating trains on the new lines.

Black money could be allowed to be used for other infrastructural projects

In these schemes the focus is on utilizing black money for the betterment of the country rather than punishing the holders. The wealth of the country is the combined wealth of its individual citizens. The gap between the rich and the poor can be bridged at a later date, when the country is well developed.

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Capital,wages,prices,taxes

05/06/2016

If the owner/company does not invest capital, workers do not get employment and earn wages. If the workers do not work, owner/company does  not get profit. There are people who think that excess(more than reasonable) profit should be distributed among the workers. Some others think that excess profit is due to the company charging higher than the reasonable price and that prices should be reduced so that the profits of the company are reasonable and the consumers are not exploited. There is yet another view that the government should increase the tax rates or new taxes should be imposed. All the views seem to be correct.The point to be considered and decided is which action will expedite development of the country as a whole. Going by the experience, government getting more taxes is not going to help the country much as benefits of its schemes do not reach the people in full and often result in wasteful and unproductive work. As the number of consumers is too large, the price reduction can only be negligible and the consumers will not feel the benefit.As regards increase in wages/payment of bonus to workers, this will increase demand for products which may lead to higher  production and higher GDP. However, if the workers are already getting reasonable salaries, they should not get additional amount.The only option left is to allow the company to retain the excess profits, so that it can expand its existing factory or set up new factories. However, it should be made clear that new taxes are not imposed only if the profits are used for expansion of the existing factory or setting  up of a new factory, thereby generating employment, increasing production and thus  contributing to the expansion of  GDP of the country..

 


Taxes and Welfare Measures

02/09/2010

Some of the governments in the world not only exempt people with income up to certain limit from payment of income tax, but also extend to them several concessions and welfare measures like subsidized or even free rations, clothing, shelter, transport, medical facilities, education etc. This does not seem to be the correct path for the long term benefits of the beneficiaries or the development of the economy. Some of the considerations for this conclusion are:

(i) Every one should pay part of his income as tax to enable the government to work.The low income people can be asked to pay a smaller percentage of income –may be 5% or even 2% or 1%, instead of totally exempting them from payment. After all they are the beneficiaries of governments’welfare measures.

(ii) The people by paying the taxes will feel and be more responsible citizens

(iii) Obligation to pay income tax will induce people to work harder and longer to earn more to compensate for the tax expenses. This will lead to increase in production of goods and services

(iv) Restricting welfare measures only to those earning up to a certain level will make people not to strive to earn more for fear of foregoing the benefits. This will make people remain in poverty perpetually.

(v) The governments should look after not only the poor people but also those with good income and therefore, welfare measures should be for the entire community and not for those with low income only

(vi) Substantial number of people are poor mainly because of their or their fore fathers’ bad habits, like consumption of liquor, smoking, spending much on cosmetics, indulgence in luxuries, consumption of high cost items etc. Exempting such people from payment of taxes will mean not dissuading them to give up bad habits

(vii) Similarly it is not correct to conclude that rich people have become rich by exploiting others or at others’ expenses. Many people are rich because of their frugal habits, savings, simple life, low consumption, avoiding luxuries etc. They should not be discriminated against, by denying them governments’ welfare measures. 

Governments’ efforts should be to provide necessary skills and facilitate employment to all the people and thereby make them earn for their needs. In developing countries, it is very easy to create jobs, as there are innumerable works to be undertaken.