Reader “IB” an India businessman, writes about the crackdown on cash and tax evasion by Prime Minister Narendra Modi.
“IB” is very concerned about recent events, as well he should be.
Background for this story started on November 8, 2016, when Modi stunned the country with an announcement that 500-rupee ($7.30) and 1,000-rupee notes, which account for more than 85 percent of the money supply, would cease to be legal tender immediately. For details, please see Cash Chaos in India, 86% of Money in Circulation Withdrawn; Cash Still King in Japan.
The crackdown on cash has hurt the poor the most, and likely the richest the least. Nonetheless, Modi has widespread popular support.
Modi’s latest set of mandates has small businessmen caught in the crossfire. Let’s tune into to an email from “IB” (India Businessman) for some details.
Hi Mish,
I am writing from Mumbai, India. I have been running a small business for a decade now. Since the business has been profitable we have also been paying tax as applicable. But with the introduction of Goods and Services Tax (GST) in India from July 1, 2017, it looks like business might start experiencing difficulties soon due to its plethora of rules, some of which are mind-bogglingly inane.
More than the tax rates, it is the implementation and the draconian measures that have been taken by the Government that has made me come to this conclusion. Given that the incumbent government has been winning elections despite steps like demonetization and the opposition is in complete disarray (Modi is a great orator), they have been emboldened to introduce measures that would be viewed as draconian by normal standards. In this context, I have to mention Modi has been able to mesmerize voters to an extent that he can make even pain appear as something that is pleasurable and he has been able to conquer state after state and has an invincible aura about him now. Such acts always bring Goebbels to my mind.
I am attaching an article that highlights three steps (of the many) that have been introduced in GST that I feel would impact businesses negatively.
Thanks for your time.
Regards,
IB
New Rules
“IB” emailed a lengthy document describing new rules. What follows is a short list of three key points that I condensed from the document.
- The government will not allow Input Tax Credit on GST paid to vendors if the vendors do not pay their own taxes. The issue here is the Modi is forcing the role of tax-enforcement on businesses who buy goods for resale.
- Tax payments are required every month. For all cash businesses, there is no problem. There is a huge problem for those who have to pay taxes on receivables, in advance, when the business owners might not even get paid. Liquidity will kill many small businesses.
- Modi now wants three tax filings every month plus an annual tax return making it 37 overall. Currently, businesses file service tax returns twice in a year while they pay their taxes every quarter. Now with GST, small businesses have to file 3 returns every month, month on month, year on year, with fines stipulated for non-compliance.
All Hail Modi
The Economic Times reports PM Narendra Modi steps up assault on Congress, eyes Indian supremacy
Prime Minister Narendra Modi’s ruling alliance is stepping up its assault on the opposition Congress party as it looks to expand its national dominance and moves closer to securing a majority in the upper house of parliament.
How to Destroy an Economy
This is the path that populist fools take to gain control and destroy economies.
When tax collections actually go into reverse as businesses fail, Modi will come up with another set of ill-advised reforms, perhaps a total ban on cash.
All it takes is a Congressional majority and Modi can and will do what he wants.
In all likelihood, Modi’s enemies will soon be silenced for the “good of society”.
Mike “Mish” Shedlock
The article is utterly misplaced and misleading. Yes, there is need for greater compliance – given the amount of taxes your so called “small Indian businessmen”, (but very rich) evade, these are a must. When you are fighting the menace of cancer called corruption and tax evasion, tough measures need to be taken. Modi does not have support just because he is a great orator – he has support because people see him as sincere, especially after seeing the decades of loot under Congress governments.
There never, ever has been, nor ever will, any “need” for any activity taxation. As Modi is demonstrating, all it does is create ever greater “need” to spy, harass and make life difficult for people.
Instead, simply tax real property. Not much scope for evasion there, as anyone who wants to claim ownership of a piece of land, and expect government help in enforcing that claim, simply has no choice but to make government aware of what they claim to own.
In countries with good controls of their borders, a tariff on all imports is also a very clean and simple way to raise revenue. It just has to be kept low enough to not give rise to perevasive smuggling. Not really sure if India has sufficient border control to allow for this, as the last thing they want to do, is offer a de facto handout to “extremists” along at least some of their borders.
But a real property tax will work as well in India as anywhere. While activity taxation doesn’t, nor won’t ever, work well anywhere. Not only does the latter require a Stasi grade spy apparatus, which will always continue to grow and entrench itself until there is nothing at all left but a pure police state.
Also, in addition, economic growth is reduced, since taxing economic activity inevitably reduces economic activity. While not charging people for the cost of maintaining the legal and police apparatus necessary to protect their land claims, simply encourages and rewards idly sitting on ones rear on idle land, instead of doing something even possibly useful with ones life.
@Sidharth,
So, in your opinion these 3 steps imposed by GST are correct and helps businesses do better? Read the 3 steps again then! Complying with these 3 steps will hurt honest tax-paying businesses. Probably because some “small indian businessman” is honest and wants to comply he understands how onerous it is. Do you seriously think, that to get at the very rich, tax-evading “small Indian businessman” you need to bury the honest tax-paying businessman (there are some of these too!)?
I can also highlight here that the rich guys managed to put away their money during demonetisation and the RBI is still counting the money. Only the poor had to bear the brunt and stand in queues to retrieve their money and some died in the process. But then in your opinion what is a few lives in the cause of greater good like corruption. To stay with corruption, a building belonging to Siva Sena Leader, Sitap, fell and killed 17 people. What did the Maharashtra CM, Fadnavis,of BJP, an ally, do. He doled out cash (from tax-payers kitty) to them (for all you know some of those who died would have paid taxes). Sitap has been booked. But then given Indian legal system are you willing to take a bet that in a short while he will be walking the streets again. Who in BMC, again ruled by BJP and Siva Sena, has been booked? For more on this read this article of Shobha De…
http://punemirror.indiatimes.com/columns/columnists/shobhaa-de/the-real-thugs-of-hindostan-are-everywhere-/articleshow/59813744.cms)
It is easy to talk of corruption but acting on them is another thing all together. Here is where being a good orator is helping Modi.
Let us not bring corruption into this. These 3 steps pertain to GST rules which are detrimental to the few honest “small Indian businessman” who comply with the law and also pay their taxes.
Thanks for your timely information on the India situation. It is unbelievably insane.
Andreas Antonopoulos gave a great presentation in which he discussed the India’s oppressive monetary policies, and the role Bitcoin may plan in restoring financial freedom and opportunity:
https://www.youtube.com/watch?v=6ZCVQHtD2l4&t
Here is a presentation in India where Andreas speaks about how Bitcoin can specifically benefit the economy of India.
A solution to so many problems of fiat currency, and yet Mish says Bitcoin is a bubble…
Yes it is pretty clear bitcoin is a bubbble
Bitcoin (BTC) has indeed experienced price movements that look like speculative bubbles. In July of 2010, for example, the BTC/USD price increased 10-fold in just 5 days, from $0.008 to $0.08. Another bitcoin bubble peaked at an amazing $31.91 in June of 2011. Then in April of 2013, the BTC/USD price surged up to $266 before crashing to less than $60 and consolidating in the $120 range. In November of 2013, the BTC/USD price skyrocketed to $1242 in part due to liquidity problems at the MtGox exchange, and a bear market began when MtGox went bankrupt. [There are now far more exchanges, none of which are dominant like MtGox was.]
Bitcoin will likely experience more speculative “bubbles” and it is possible we are in one now. It is also possible we are not. I think Bitcoin has barely reached the “early adopter” phase of new technology adoption. I see the potential for much more upside.
Mish,
I wanted to ask you whether you’ve watched any of the videos I’ve provided, and whether they’ve influenced your thinking about bitcoin.
BTW, do you have an opinion about how high BTC/USD will go before this “bubble” bursts? I am currently planning to take some profits around $7000 (mostly for personal risk tolerance reasons).
I have watched numerous videos and read many theories on bitcoin.
Like the technology. The coin itself is a bubble IMO.
But it could still easily double from here – or collapse.
Even Elliott Wave International has declared Bitcoin in a bubble.
What price do they predict BTC/USD will reach before the bubble bursts?
Bitcoin will just be made illegal – simple fix. Bitcoin isn’t a solution, it’s a work around like cash which they are cracking down on. Besides that Bitcoin is a Ponzi scheme and unstable which will merely add more chaos.
Like they made selling drugs and taking payment in Bitcoin illegal? Which did exactly nothing to stop that trade, for more than about a week or two……
Bitcoin was created specifically to be difficult to make it hard to enforce bans on. In China, they’ve been trying for years, yet the Chinese still shift millions overseas by way of Bitcoin. As long as people has some sort of access to the internet, it will be fiendishly hard to enforce a ban on it.
China hasn’t made Bitcoin illegal it has merely setup capital controls which people use Bitcoin to get around. Bitcoin is a fad and a bubble – it had no inherent value – most people hold it speculating that the nonsense with get worse before it collapses. It’s moronic to say it could be a solution in India since: 1) most are far too poor to own a electronic device 2) they are not as a culture users of electronic device aka poor 3) once it’s illegal it’ll make the situation worse – the only reason it’s not illegal is that there’s no chance it’ll be used in India. Everyone pushing Bitcoin just wants it to increase in value so their speculative bet pays off.
1) and 2) Electronic devices, and connectivity, is getting cheaper every day. At some point, even the poor will have access. Then their “culture” will change. Western girls didn’t have much of a culture of texting incessantly back in the 80s either…
3) If Bitcoin is made illegal, it is because people find it useful. Like junkies find drugs. So they’ll get around the bans. And further, in a world of incessant and accelerating confiscation by government, those who avoid the confiscation, will fare comparatively well. Leaving them with more wealth by which to influence future government. Whether by carrot or stick. Indians already use Bitcoin. Plenty of them do, so it’s not useless. Just like anywhere, it’s not massively widespread in use yet, but it’s growing. As more people become aware of it, then get used to it, this growth will only continue. More so, as soon as technology which provide greater anonymity guarantees become more available, as that will make crypto currency benefits much more apparent.
And, just as with all else in this world, despite what the well indoctrinated saps who jump like puppets to Jim Crarmer’s childishness may have been told to believe and regurgitate: Only simpletons and irrelevant’s care even one iota what Botcoin’s, nor anything elses, supposed “value” at any given moment happens to be. Bitcoin’s relevance is not, nor has ever been, nor will ever be, as yet another vehicle available for the kind of dumb stooges, who believe speculation/investing, in anything, is some sort of useful activity, But rather that it provides an, at least partial, escape hatch from a world of ever more repressive spying, theft and confiscation.
If the sharing of ideas via internet forums like this one were illegal where you live, would that stop you from using the internet to communicate? Do you understand that bitcoin is a protocol that enables individuals to share bits of digital information using the internet?
For those who are open to learning about this revolutionary system for establishing trust over a decentralized network, these videos would be a good start: https://www.youtube.com/playlist?list=PLDto3IHr_v57h3FFYlLN3-3_J9H8lMFaH
Bitcoin is a cult.
For those of you who are open to hearing about our lord Jesus Christ, these videos would be a good start
https://youtu.be/Kppx4bzfAaE
Mish I’m surprised you’ve misused ‘populist’ like globalist media do. Socialist or collectivist would work better no?
most of my Indian colleagues (IT people) love Modi and find his measure justifiable to crack down on tax evasion … they don’t care if ultimately it’s the poor who suffer…
Just as most well indoctrinated half wits over here, find it justifiable for whatever Massa they have ben told is their “leader” du jour, to send people off to Gitmo for whatever petty pretense Massa finds convenient at any given moment. IOW, nothing new under a dumbeff’s sun.
If it flies in India – next stop: Illinois.
Where’s Uncle Joe? I bet Modi is his new hero.
Jeez…what else to say?
Seems Modi is hellbent destroying the Indian economy. Divide and rule, perhaps?
Effects will be monumental and none good, I predict.
For those with a better historical knowledge than mine, were the 70s this crazy, or are we living through a special case?
There was Uri Geller bending spoons, all sorts of mystical nature stuff of which we are seeing the result in the stories about climate, 90% taxation in the UK for high earners, insane labour laws … it goes on. I know many despaired then.
Maybe we have larger government sector now, so we are more vulnerable to the predilections of those who staff it?
Hey Mark. The 70s (and 80s) were indeed turbulent times. I personally thought that most developed nations were screwed due to a multitude of reasons (runaway government debt, high inflation and high interest rates among them). I was very negative at that time. Then, a funny thing happened. Many of the problems disappeared over the next two decades through good old human ingenuity.
That’s one of the reasons I’m much more positive about things now. Our problems are not insurmountable in spite of what some people will say on this site.
“Many of the problems disappeared over the next two decades through good old human ingenuity.”
It’s called kicking the can by removing the last vestige of restraint on running up infinite debt. Has nothing to do with human ingenuity, nor anything “good old” at all.
None of the “problems” of the 70s were ever solved. Just temporarily papered over by a mountain of debt. Such that the problems are now an order of magnitude more intractable.
Reblogged this on World Peace Forum.
On point No:1, if vendor does not pay his tax, the small business literally will end up paying the tax twice — he would have paid to vendor and cannot claim in his Input Tax Credit, effectively doubling the tax rate for the small business. Where is the locus standi for the small business in a tax dispute between the vendor and government? As it is, small business has its work cut out by the need to get orders, fulfill them and get the payment and has no time or inclination to play the role of a tax-enforcer.
How much of Indian employment is in small business?
This will just increase tax evasion and/or unemployment.
Slowdown guaranteed.
From http://www.businessinsider.in/Indian-SMEs-contribute-45-tocountrys-GDP-Report/articleshow/52864199.cms …
“..small businesses make up for 45% of India’s GDP, around three times of what Corporate India contributes. The sector is also said to be employing close to 46 crore people.
Well, it wouldn’t double, but it would be relative to the markup. On the other side, if the originating vendor didn’t pay the tax, he should be able to lower his price by that amount so it nets out in the end. Assuming honesty throughout the system of course.
cost of goods: Rs.100
tax @18%: Rs.18
Small business pays vendor a tax of Rs.18
Now if he cannot claim Input Tax Credit of Rs.18, he will pay additional Rs.18 to the government, in effect paying Rs.36 as tax. (total tax: 100 — ITC – 18 — Net 82. But without ITC he pays 100 instead of 82)
Moreover, if you assume honesty throughout the system it would imply allowing the Input Tax Credit once it is paid to the vendor.
This system of not allowing ITC assumes dishonesty.
My point is all may not be honest but it is the job of the government and not small business to ensure the vendor pays his tax. It is akin to a teacher saying that if your friend does not do his homework you will be punished even if you do yours.
Thank you KPL for shedding light upon this matter. The inability to obtain immediate relief for the Input Tax Credit seems harsh on properly conducted businesses but presumably in the normal course it is only a timing matter, is that not so?
Clearly, if the supplier made goods available for Rs.100 and induced a buying business to believe that that sum included GST of Rs.18 but the supplier did not account to the Goverment for the Rs18, then the Government surely has a case for withholding any ITC. That would encourage buyers to deal only with honest suppliers.
If the Goverment is really to get so frequent tax returns as 37 a year, then any supplier purporting to charge its buyers GST but then failing to account for those amounts to the Government surely would soon be discovered and subject to sanction. Accordingly, these Modi reforms might be said to contain a self-correcting mechanism such that compliance and prompt settlements of tax due and for credit will become the norm. If so, I number myself as a Modi fan.
“That would encourage buyers to deal only with honest suppliers.”
Now business has to continuously watch which of their vendors are paying tax? Compliance cost to business. Doing government’s job. Also there could be multitude of reasons for vendor not paying the tax promptly. This assumes dishonesty. A personal question here have you ever delayed paying tax (individual or business)? Did you want to be dishonest? You pay with fine. Additionally vendor may be honest but not computer savvy. So again he can be construed as dishonest for no reason.
“self-correcting mechanism such that compliance and prompt settlements of tax due and for credit will become the norm.”
In this case the vendor might have genuine working capital problems, running losses, any number of things in real life and would be willing to pay with interest later. Such things happen in life. He is also penalised.
As Yogi Berra said, things in real life do not always work out the way they do in abstraction (theory).
Also when you pay tax on accounts receivable, month on month, then you are very likely to run into a liquidity crisis in business. It will help cash-rich companies as other businesses will be put out of business soon.
Economies are never “destroyed” as goods and services are always exchanged by one manner or another. The Russian revolution, the aftermath of wars, and so on, demonstrate that singular truth. When it comes to government one always needs to ask the questions of who benefits and who pays. Before the era of big government it seemed that there were only two sides to consider but as governments have expanded their roles and their employees, then we must realize that a third party has been added if not a fourth. We have the goods and services that a government provide, those employees who provide them, the recipients (many of whom never pay taxes except indirectly) and the tax payers who provide the where with all for the government spending. And perhaps we should not forget those who supply the governments with goods and services. The base question is how much is enough that a government should do for its people.
When a government has a billion individuals of all economic stripes that question becomes quite complex and the cost of doing becomes almost exponentially larger. We may talk about individuals paying their fair share but who determines what is “fair”? The opposite side of that coin is who decides what others may be entitled to receive by virtue of being citizens. Will Modi’s tax code claim victims and reduce revenue? Common sense say yes to that question, but when was the last time any government was run by common sense? As I recall, India dallied in a communism style of government in the fifties and sixties with little success. And there has always been many who would wish to return to those times but now claim they know how to do communism “right”. I suspect socialism is the current political thought making the rounds in India at the moment and we shall see more such government policies veering towards that goal. We do know that tax evasion will continue without abatement, human nature being what it is, and that much of the tax revenues will be lost in the process of enforcement. The net result is a minimal tax revenue increase at best and greater than marginal tax revenue losses at worst.
I generally figure government is its own society, that it interacts with a nation where it finds benefit to do so by offering compromise. Socialism attempts to draw in the most people by creating the greatest compromise… but let’s not fool ourselves, it is still people looking to government for answers and government forcefully telling people what to do. There will always be a tendency, as government expands, towards overthrow of that order, or enforcement of that order by dictatorship… which is a good enough reason to my thinking to keep government small. The idea of replicating a standard across a country beyond the most basic of necessity is not only an illusion but bound to tip into the formation of a powerful majority group of some kind, that will act as people do when they feel invincible.
It wasn’t until the enlightenment that the state came to be viewed as an absolute entity with powers to intrude into the lives of its citizens. Once we, as a civilization began to view law as a natural “thing” and started to eschew religion as a necessary spiritual (in the full sense of religious belief, not the modern version of ambiguous clap trap) then the state took on a life of its own, as you have pointed out. Unfortunately, political organizations have a tendency to grow beyond their usefulness to the detriment of all concerned. Is there an antidote? Unfortunately not.
Ensuring compliance with taxation is the most important function of government. It determines the level of corruption in a society. Greece and Germany are great examples. The Greek government never could enforce its taxing authority on the public and has been through multiple currency crises. Germany, at least since Weimar, has been able to and has a respected and healthy economy.
When the population of a country decides that it doesn’t have to support the government, and isn’t held accountable, the country quickly decays into fraud and corruption. The USA has been going down that road for a while and it shows.
The more tax the more corrupt a country becomes, maybe… anything to blame ‘the people’.
Greece 2010 taxed 4% less of gdp than Germany, for example, not even surprising during a bust.
Gone are the days of 5 or 10 % taxation.
http://www.bbc.com/news/magazine-33479946
Compliance with rule of law is the most important government function since without it most commercial and many private economic transactions cease to exist. Certainly compliance with taxation falls under that heading but ti has its own special problems. When taxation is viewed as onerous and excessive or perhaps even “illegal” then the perception is that taxation is viewed as outside the rule of law. Usually when such a problem exists it is the company of other social and government problems. Most citizens are willing to pay their taxes until their perception that the government is taking extreme advantage of them. On the other hand, a culture may exist that allows its members to use various tax avoidance schemes. It is a national past time in Italy, for example.
Governments lose legitimacy when demands on people become excessive, though obviously a subjective judgment as to what is too much tax, etc. If the government believes its demands are just and people disagree, then government must necessarily use fines (e.g. Obamacare noncompliance), imprisonment, and as a last resort violence and warfare to obtain what rulers deem is justly due government in revenues, services and obedience. The alternative is to “look the other way” or acquiesce to noncompliance (e.g. as USA does vis-à-vis medical marijuana, SSI disability fraud, etc.).
Citizens and governments often disagree. One such situation faced UK’s legitimate government under King George III in the late 1700s when American colonists rebelled against taxes and “unfair” trade restrictions. UK’s legitimate government lost, when rebellious citizens went to war, “colluding” with France for financial aid. Ironically, “collusion” is a precedence dating back to the 1700s. Until the DNC took over the Deep State, and in 2017 created a new legal precedence out of thin air where none existed before, against a rebellious pro-Trump citizenry, retroactively demonizing a subset of conversations between pro-Trump Republicans and Russians (conversations between Democrats and Russians/Ukrainians exempted). Congress needs legislation retroactively criminalizing USA citizens associated with Donald Trump talking to Russians, otherwise Mueller’s Russian witch hunt is a purely political vendetta with no basis in law. Alternatively, the GOP needs to demand a second special persecutor to look at Mueller’s appointment (collusion with Schumer and other Senators in the deputy AG’s appointment process and subsequent staffing decisions), collusion between the FBI’s Comey and McCain (who ordered the FBI to investigate Trump based on a fake Russian dossier from Mr. Steele’s UK Fusion company), as well as the Fusion company and Mr. Steele (a former-MI-6 operative offered $50k by Comey’s FBI to help frame Trump). USA.gov will lose legitimacy without a second special persecutor to look into the origins and operations of a tainted and possibly corrupt first special persecutor’s office. No stone should be left unturned, including the alternative hypothesis that the DNC election hack was an “inside” job by Wasserman-Schultz’s DNC and her possibly criminal Pakistani Congressional IT staff, or even a DNC staffer.
“Ensuring compliance with taxation is the most important function of government…Germany, at least since Weimar, has been able to and has a respected and healthy economy”
Indeed, the Weimar government was a real bust, and the post-Weimar governments did produce healthy economies. Respect is a bit harder to measure, and I would tend to disagree with you on that. In all fairness, the Versailles Treaty was like a stone weight drowning the Weimar government, which was by all accounts a fun-loving, poverty-stricken, paranoid police state (fearing both the right and left), and as wracked in violence as Venezuela.
As to taxes, if everyone is making lots of money and can afford all the necessities of a life and a few luxuries, then taxes are never a problem. It is only when citizens are hurting financially that taxes become a burden and the problems begin. The top echelons of government historically are oblivious to the bottom rungs, and try to milk the citizenry for too much when they are hurting and thereby invite troublesome responses. USA adding Obamacare taxes, state tax hikes, property tax hikes, sales tax hikes, gas tax hikes, lots of little tax and fee increases that add up for the affected citizen doing the paying.
It’s obvious to any sane person that government causes far more harm than not having government would.
Governments killed 300-400 million people, destroyed trillions of dollars of wealth, and slowed economic and technological development by decades in the 20th century. There’s a real good chance that in the 21st century it will deliver a fatal blow.
Almost no one can see that survival adaptations that arose deep in man’s ancestral past are no longer survival adaptations. Now, they’re closer to extinction adaptations.
All very good points. But what are the alternatives? No government leads to empires and one world schemes, like when European nations give up sovereignty to the EU or conquerors emerge to take advantage of weak states. If USA tried to disband government, then the most aggressive sociopathic types would seize power (Neo-cons, Leninists, etc.).
I know many despaired then. Maybe we have larger government sector now, so we are more vulnerable to the predilections of those who staff it..’
You will note, though, that this has not hurt the popularity of Modi and his party in the slightest: they went on to win several major elections with a handsome margin. Maybe that is because those most affected by the demonetization: the “unbanked” poor, are also not participating in the political process, but I don’t know India well enough to tell.
What surprises me is the different accounts available in western media. I have read convincing articles that portray the recent shake up of the monetary system as a success, with a good outlook, and I have read others quite the opposite. The style of the reports is not even hyped, with the first there is clearly a sense of belief of the writer, with the latter they focus on the difficulties and errors leaving little room for any positive views. I can understand both, but damned if I know what they add up to as a result. India is a very big and diverse country, so I don’t understand how more bureaucracy is going to improve it.
Yes to that but winning elections isn’t a matter of opinion or presentation. Modi’s party really did well in recent elections.
Apparently voter turnout is high in India, including of the poor. These two links give some idea :
http://wake-up-humanity.blogspot.in/2014/03/lok-sabha-elections-india-2014-part-4.html
http://themonkeycage.org/2012/09/is-india-unique-in-having-higher-voter-turnout-among-the-poor-than-the-middle-class-and-rich/
Apart that I really do not know what sentiments are at work.
Rich and Middle class do not believe that a change in government is going to change their lives. The Poor desperately want the change to happen and voting and probable change of government is the only means. Hence the higher voter turnout among the poor.
The most effective way for govt to tax, in theory, is to institute a national sales tax and eliminate income tax. This is what governor Huckabee proposed when he ran for president. This would capture all under the table workers, including illegals when they consumed. I don’t know how this would work out in reality however. Is this what the Modi is trying to do here? If so it seems like an inept roll out.
Can also help reorientate from consumption.
Exemptions for necessities.
Why? Aren’t you assuming that all businesses will report all revenue? That cash businesses won’t cheat? Aren’t you assuming that Congress won’t play with the tax code to ensure that favored groups don’t have to pay sales taxes? That lobbyists for certain industries won’t work steadfastly to decrease the amount of taxes that their employers have to pay?
How about taxes on loan originations? Sales of stocks and bonds? Do banksters get off free?
Perhaps we should tax beer, but not expensive wine. Because expensive wine is consumed by the job-creating entrepreneurial class that create our jobs, and we want them to have as much money in their pockets as possible.
All forms of taxation have the same problems as long as you have a corrupt society. And the USA may be one of the most corrupt.
Thats why I said in theory. I would think there is an effective way to do this without banning cash. They do it in CA to pay for national health care. I don’t know how much leakage they have with their system.
Most businesses report their sales tax monthly and there is no system that can absolutely prevent cheating, but the real reason sales tax will NEVER replace other taxation, is the same reason I am for it. Transparency.
The goal of government is to levy taxes supposedly for the common good but always trying to sell them as coming at the expense of someone else. This is how they generate support for ACA…not by lowering cost but by subsidization with other people’s money.
A sales tax would be 100% transparent, every person who can read numbers would see their tax on every purchase…..and that CANNOT be allowed. People do not care about their taxes as long as they aren’t reminded of how much THEY pay. All VAT, corporate, business and property taxes become hidden tax in everything we buy. How much tax do you pay buying a new car? With GM probably very little, especially if you don’t consider their bail out. But most other companies are paying large amounts of tax that they have no choice but to pass through in the cost of goods. Further, business has been forced to become an agent of government as their collection agent, under penalty of law if they fail to collect payroll and sales tax correctly. Ultimately business does not care one bit about how much tax they pay as long as they can pass it on to the customer and not leave them at a competitive disadvantage, which is why corporations are constantly seeking protection from our government in the form of tax breaks as well as manipulating tax codes to disadvantage their competition. Meanwhile our costs increase, our jobs disappear, our government becomes more corrupt in it alliance with big business and we are told how great we are ALL doing when the top five high tech companies are showing the majority of gains…..companies who’s technologies are eliminating jobs.
Until people fully understand the ramifications of their every choice, we will continue with self destruct policies. Transparency is key and without it we are blind.
How much cash business do you do every day, say as a percentage of your overall spending? For me, very little, so the amount of cheating potential would seem small in comparison of the overall economy at large.
Sales tax can be done without harming the poor. In Texas groceries are not taxed and vehicles are taxed at a different rate from general sales.
Why is it that we are so concerned about a few cheaters yet willing to spend billions on government policies intent on preventing or punishing cheaters. This is a massive game used to gain ever more control. The illusion of fairness that costs everyone dearly yet never produces the promise of fairness…as it can’t given to do so would eliminate the demand for our all powerful government to protect us.
They work endlessly to provide safety and security from the threats, real and imagined, that they have on large part created and cannot eliminate. The supposition that they have actually removed risk from our lives only enables us to pursue even more reckless and stupid behaviors. It is a deadly circle of madness, the creation of risk from nothing that finds it’s solutions only creating ever greater and more real risks. The healthcare crisis that supposedly created the necessity of ACA has now actually precipitated a very real crisis in healthcare and we all cannot wait until we see what disaster THAT remedy will put on our heads.
Solutions exist and are not all that complex, it’s just that they would diminish our need for a government anywhere near the scale and scope of what now exists. The ACA will never go away as it represents a huge part of our economy, a portion of power that NO politician will walk away from. This is why they cling to preposterous claims of death and destruction if they dare take even a small step back. This is THEIR crisis, life and death for the power brokers. They will never surrender, never give up….that is OUR role. Sacrifice EVERYTHING, every principle that our nation was founded for security and the “greater good” of “the people” which really does not include us. We are not told to sacrifice for ourselves, but for “others”, just as we are told that “others” actually pay all of the taxes. It’s all about punishing, protecting or rewarding “others”. A very religious stand for those who claim to despise religion… until you realize that theirs is the religion of STATE.
Modi is a Hindu nationalist and his support in India is based on the same sort of people that support Trump in the US. Religious fanatics the world over control governments to the detriment of the rest of the population. In the US it is right wing Christian nationalists that hold the US hostage to their lunacy, a Christian version of sharia law.
Hi, Uncle Joe!
Well, we could always go full atheist marxist and avoid those crazy “do to others as you would do to yourself” crazy Christians.
On wait. We had that under obama.
Were we only so lucky as to have that limited a government: Sharia in it’s totality doesn’t comprise more than some hundreds of pages. The insult called Obamacare alone, is orders of magnitude bigger than that….
The Ten Commandments + US Constitution and Bill of rights most certainly trump Sharia hands down as far as legal codes go. But no Prophet of any religion, could even in his craziest moment, manage to come up with anything even remotely as destructive and inhumane, as the kind of progressive dystopia the West is now mired in.
Are you serious???
Wonder when cash will be outlawed here.
Just as soon as they can dream up an excuse to do it. It’s part of the overall effort to enslave everyone in the New World Order.
Bolsheviks in USSR were as cashless as it has been possible to get in modern times. As soon as Trump is out of office, the long march to the Marxist Utopia without cash and other capitalist evils can resume.
For those with a deeper interest on this subject, Peter Tenebrarum’s Acting-Man.com site has been reporting the changes in India since Modi’s demonitization was initiated last November…All I can say, is there is a reason Saint Teresa’s Missionaries of Charity continue their work in India today…
These stupid laws came about because of rampant culturally approved tax evasion.
Everybody knows taxes are supposed to be paid by someone else, and while their new enlightened policies crush businesses as well as their employees and customers, as always it will be the businesses that are to blame.
The fact that government is ALWAYS broke never is an indication of their profligate and corrupt ways, only that corrupt citizens immorally RESIST relinquishing their hard earned property. The left has unendingly blamed the successful for the plight of the failures, with never a moment of introspection that it might be THEY who are ultimately responsible. The drive to create a sense of entitlement that converts large swaths of citizens into dependents of the state, dependent on the theft by the state to propagate even greater strife reinforcing the entitlement mentality.
India has been a third world poverty state forever, yet anyone who carved out success from it’s corrupt depths is the scoundrel cheat responsible for the plight of the poor.
“The issue here is the Modi is forcing the role of tax-enforcement on businesses who buy goods for resale.”
…
Ugh.
This is very bad for small business. The original legislation for ACA had a similar provision – forcing business to 1099 anyone they spent $500 / year for services / product. Even a tiny business likely would have had dozens of 1099s a year to file. An expensive accounting nightmare. Thankfully, that early provision got deep sixed.
according to my accountant this is in effect. If you know otherwise let me know because he hounds me every year to get all the information out for these.
I think you should consider a new accountant.
“Today, President Obama signed a law that removes the expanded “1099” reporting requirement from the Affordable Care Act. This is a big win for small businesses.”
https://obamawhitehouse.archives.gov/blog/2011/04/14/repealing-1099-reporting-requirement-big-win-small-business
I can’t imagine why the government would want 3 filings a month. That cannot add any value to the process.
Demanding this would eventually force the exhausted store owner to beg the government to switch to an all electronic payment system – effectively a non-cash system. India is moving strongly in this direction.
An excuse to keep closer tabs on their captive underlings. Back when the protection rackets were mostly ran by Italilan immigrants, rather than Washingtonians, payments had to be made weekly as well. For similar reasons. Soon, everyone will have cameras in their house, to make sure they are not engaged in anything subversive. Like “avoiding taxes” and “supporting terrorists.”
–> “That cannot add any value to the process”
What makes you think any government adds value to any process? They pay themselves regardless of value added — and usually value destroyed.
In the short run, this will cause lots of economic pain and suffering — and it might raise some extra tax revenue as people figure out how to work around the corruption (that is all this tax is — another form of corruption).
The government isn’t providing any additional services for the additional revenue. They weren’t providing services to most people before the new taxes. Its just greedy politicians serving themselves — same as every other country. India is more corrupt, but its not special.
In the longer term, people will start using black market currencies. Government officials will learn to accept bribes or they will be killed (oops, they will have sudden “accidents”). Criminal gangs will provide more of the protection that police fail to provide. And the tax base will get decimated.
China and Pakistan should be very worried. When (not if) India collapses, its a failed nuclear state
“2.Tax payments are required every month. For all cash businesses, there is no problem. There is a huge problem for those who have to pay taxes on receivables, in advance, when the business owners might not even get paid.”
This rule is so inane it basically killed all financial accounting rules currently out there. What if there’s a write-off on bad A/R? Will the govt return the paid tax since the A/R was never collected? I guess there’ll now be a new debit section in India called “Tax receivable from government” due to write-offs.
@Chris,
Small businesses in India selling on credit live with this rule. They pay tax on the billing done every quarter irrespective of whether the payment is received or not (government ensures its pound of flesh). This payment is done every quarter (and filing every half-year).
The government now wants the small business to pay every month (on the tax billed during the previous month). Month on month, year on year. Whatever small respite was there has also been done away with.
As they say cooking for a few days is okay, but cook day after day, month after month, year after year and then you will realize what cooking really means.
Imagine what it would do to a small business. FINITO!
I see. I thought it was a new rule or something. Thank you for your explanation
Politicians only know how to count votes. It is that simple as the majority of the voters do not posses large notes.
However, they have decreased the total money supply which leads to increases in unemployment and a reduction in employment.
Count on Politicians to totally mess up the economy and find new scapegoats to take the blame.
India has a far larger problem with expansionist India to their Northeast and hostile Pakistan to their Northwest with China insisting on building a road to their ally Pakistan thereby completely encircling India. In combination with the harbor base in Sri Lanka that China just purchased for $1.1 billion (that they swear they will never militarize just like the South China Sea), India is in fairly serious danger of being isolated and crushed.
India is a phony democracy. I have family who live in India and they tell me that. The elections are fraudulant and the chosen candidate always wins.