posted by Rahul Chimanbhai Mehta Rrg

Decreasing use of unaccounted cash and thus decreasing taxes on honest tax payers. . Accounted cash when buyer B pays seller S, S does declare it as his income, while buyer B may or may not declare it as his expense. A payment made via bank using cheque or credit card is always accounted because bank is witness. So seller S cant deny. . Now many persons' all income is all cheque. But often they withdraw cash, and give it to seller S, and S will not report it as income and not pay taxes. So govt is forced to raise taxes on honest tax payers. This is how unaccounted cash transfers increase burden in on honest tax payers. . So how can we allow cash payments, and also ensure that cash payments do get properly accounted? IMO, following system can work . 1. buyer B will option to give his id to seller S , and S will put it on receipt or need not. When payment is done by card or cheque, buyer B's tax-id will automatically come on recipient, . 2. say buyer B had paid Rs X . 3. say seller S obtained Rs Y of revenue in whole FY = Financial Year and paid taxes of Rs T. . 4. Then next year, buyer B will get tax credit for 50% * X * T / Y . 5. If seller S doesnt report the id of B, then B cannot complain (the remedy for B is to use card or use trusted sellers). . IOW, say a person got salary of Rs 10 lakhs. He paid taxes of Rs 2.5 lakhs. And he spent Rs 3 lakhs using cash for check via various sellers. Say some sellers didnt report his expenditure with his id and some sellers did. Say Rs 2 lakhs of his expenditure was reported with his id to 100 sellers S1 to S100 , and expenses were X1 to X100. And say taxes they paid in that FY was T1 to T100., and their total incomes were Y1 to Y100. . Then next year, tax credit buyer B will get will be . 50% * [ (X1 * T1 / Y1) + (X2 * T2 / Y2) + .... + (X100 * T100 / Y100) . To give an example in numbers, say buyer spent Rs 300000 with 4 sellers S1, S2, S3 and S3 and he bought goods worth Rs 50000 , Rs 50000, Rs 100000 and Rs 10000 from them. . Say S4 didnt report B's Ids. So B wont gain on S4's tax credits. . Say S1 made losses and paid no taxes. So buyer B wont gain anything from S1 . Say S2 and S2 made total sale of 1 crore and 2 crore. And taxes they paid were Rs 5 lakhs and Rs 8 lakhs. . Then tax credit B will get from S1 = 50% * (5 lakhs / 1 crore ) * Rs 50000 = 50% * 5% * Rs 50000 = Rs 12500 . And tax credit B will get from S1 = 50% * (5 lakhs / 1 crore ) * Rs 50000 = 50% * 5% * Rs 50000 = Rs 1250 . And tax credit B will get from S2 = 50% * (8 lakhs / 2 crore ) * Rs 100000 = 50% * 4% * Rs 100000 = Rs 2000 . So next year, buyer B will have to pay Rs 1250 + Rs 2000 = Rs 3250 less tax. . IOW, tax credit's incentive will make a buyer use card \ cheque as far as possible. This will reduce tax evasion and thus reduce excess tax on honest tax payer. . ====== . How US elitemen reduced unaccounted cash by . . (1) ensuing that a large number of people are into debt !! This forces then to use card. And so seller's income does get registered. . (2) by giving low interest loans to large corporations ; when a large corporations take amounts from 1000s or lakhs of customers, they take it via their employees such cash register clerks ; so if cash isnt registered then employees may rip-off , and so cash registration is streamlined . (3) rigging stock markets which enable large companies to get more capital . (4) jury trials on tax evasions. . Option (4) is IMO good. The other options are IMO unsustainable i.e. they improve tax collection but weaken smaller employees.So I dont support them. .

by Rahul Chimanbhai Mehta Rrg



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