A high-level official panel on Tuesday proposed levying of banking transaction tax on withdrawal of cash beyond a specified limit in a day to check black money, and was not in favour of the tax amnesty scheme.
A report by the Parthasarathi Shome Committee, appointed by the previous UPA government, suggested taxing farmers with large land holdings in addition to a host of measures to widen the net.
“Taxpayers keep waiting for amnesty schemes to be announced and take advantage of these schemes to build their capital.
“Amnesty schemes also cause inequity among taxpayers, and there is no proof that they improve taxpayer behaviour among evaders. They, therefore, should not be encouraged through amnesties,” said the report of the Tax Administration and Reform Commission (TARC). It was the third report in the series.
Highlighting that there is no instrument at present that captures details of cash withdrawals from bank accounts, it said such information would help the Income Tax department widen its information base on the use of black money.
Making a case for banking cash transaction tax (BCTT), it said: “...IT Act should be suitably revised to include in its ambit cash withdrawals exceeding specified amounts in a day from bank accounts other than savings accounts.
“Alternatively, BCTT should be reinstated as an effective administrative measure.’’
BCTT was introduced in June, 2005, to track unaccounted money and trace its source and destination, but was withdrawn in April, 2009. BCTT was levied in respect of cash withdrawals in a day exceeding Rs.50,000 in the case of an individual and Rs.1 lakh in the case of other persons.
The report further said large farmers should be brought under the tax net.
“Against a tax free limit of Rs.5 lakh on agricultural income, farmers having income above much higher threshold income, such as Rs.50 lakh, could be taxed. This will broaden the taxpayer base,” it said.
Talking about other steps to widen the tax net, it said a conducive environment and tax culture should be created to encourage unorganised retailers to pay tax dues voluntarily.
The panel also recommended that the wealth tax base could be increased by including intangible financial assets in the base while considerably raising the threshold and decreasing the wealth tax rate. It also pitched for tax administration measures to improve SMEs tax compliance.
