The United Progressive Alliance government has termed “pro-rich” and “anti-development” the BJP’s prime ministerial candidate, Narendra Modi’s promise to consider abolishing income tax if he was voted to power.
A similar proposal was examined and rejected by Prime Minister Manmmohan Singh when he served as Finance Minister in the P.V. Narasimha Rao government in the early 1990s, Minister for Rural Development Jairam Ramesh told The Hindu. “Economist Raja Chelliah had also been asked to look into it.”
“Mr. Modi is good at abolishing, cutting down and killing... The proposal only means that he wants no development, and he wants only the richest to survive,” Minister of State for Revenue J.D. Seelam said. “He wants to cut taxes for the rich businessmen and doesn’t want to improve the quality of life of the poor.”
“So far, Mr. Modi has betrayed ignorance of geography and history. With this idea, he will have added economics to that list,” Mr. Ramesh said. “Before Mr. Singh, this was tried out in the late 1950s by the then Finance Minister, T.T. Krishnamachari, on Hungarian economist Lord Nicholas Kaldor’s advice, but was given up... In the 1980s, it was championed by Vasant Sathe and nixed by L.K. Jha.”
“There is not a single significant country in the world, outside of tax havens and the UAE, that does not tax income,” Ernst & Young National Tax Leader Sudhir Kapadia told The Hindu. “If income tax is abolished, the biggest beneficiaries will no doubt be those who earn more or the rich, and this will be regressive. More importantly, will you be able to even afford the elimination of a source of revenue?”
Mr. Kapadia said that if the new government could adopt the tax proposals in the first draft of the Direct Tax Code, it would be a tremendous achievement as it would address the middle-class constituency that parties were trying to please.