ArthaKranti Presentation With Description

7/31/2019 ArthaKranti Presentation With Description

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Given a choice, who would not want to live prosperous and peaceful life, in principled way !!

If we have a system, where there is abundance of capital (money) with easy access to the same, everyone will

have opportunity to focus on more valuable goals, the real prosperity. People will act out of a sense of

abundance rather than fighting out of a perspective of scarcity. If, benefits of following the system are much

higher than - the earnings and risks associated in escaping the system - more people will follow the system &enjoy the benefits of honesty rather than taking ethical & legal burden of escaping it. With an abundance of

opportunities and inherent benefits for living in a principled way, harmonious way of life will be but natural.

We believe that Arthakranti is a key and a leveraging step towards a system, where Principled, Prosperous &

Peaceful Living will be enabled. Then, we as citizens and as a nation will not only get strengthened internally,

but will also get our deserved position on the world map. And then we can really walk further on path of

progress, crossing all the boundaries and constraints, to realize our deeply held core values in the form of

Vasudhaiva Kutumbakam The Global Family hood.

Arthakranti (Artha- Economic; Kranti - Revolution) proposal, which consists of technical corrections in our

current economic system, is aimed at Indias economic rejuvenation. By economic rejuvenation we mean a

transformation leading to an abundant capital formation with credibility for all. Thus moving current state of

scarce & costly credit with accessibility for only a few favored - - increased and wide spread banking system,

facilitating credit registration for all in the mainstream economic system, providing them an easy access to credit

at a low cost. Merging the parallel economy (based on black money) into the

mainstream legal economy, resulting in removal of hidden and sudden obstacles not only for citizens but also forthe government; thereby offering an effective to the government. Adequate revenue for effective

governance at all government levelsEradicating complex, uncertain, inequitable taxation to bring in a wide

spread net of simple yet productive, efficient and a certain taxation. Twofold effect: Empowering government at

all levels (local, state and central) on one side and relieving people from heavy tax burden on the other side.

Arthakranti Proposal will complement, strengthen & synergize the efforts in specific areas by individuals, NGOs

etc., resulting in a holistic approach to think and act beyond the current social & economic issues.


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Our nation is like a huge ship sailing in the middle of the sea. Just when it looked like sailing smooth, it hits

a hidden rock suffering damage causing water to rush into the compartments from the bottom.

All of us, irrespective of the class to which we belong, have boarded the ship with a valid and boughtticket.

The bottommost Unorganized Class is in panic, running around, screaming for survival. The only way is to

move upwards.

The Organized Class sleeps behind closed doors, feeling secured with pensions, insurance and provident

funds. They do hear an odd scream but pretend not.

The Rich and the Elite Classthe blessed few are up enjoying the view. They dont even know that the

ship is taking water in.

But this ignorance, real or fake, will not stop any of us from sinking in the worst scenario.


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Let us see our economy as a multi-storied building. The overhead water tank represents the Government

Treasury. The floors from top to bottom are the various government expenditure heads in order of priority.

There are pipes carrying water down from the overhead tank to each flooron many floors, their taps run

dry. On investigating, we realize that more than half the overhead tank is emptyand the lower levels willnot get any water unless the tank fills completely. This gap in the overhead tank is the .

We check the reservoir on the ground and find that it does contain a lot of water. The pump is also

running at full speed. The pipes, carrying water up into the overhead tank representing the taxation

system - are so impossibly twisted, choked and corroded and are holed at many places. As a result,

and that is why the overhead tank is not getting completely filled.

And all this water flowing out of the pipes - meaning - evading the taxation system is the . Itis accumulating outside the building. Though it started out as a small muddy pond, today it has assumed

the massive proportions of an ocean. This is what is the .

At some point, a common man gets too thirsty to wait any longer and has no other option but to pick up

his bucket and go to the muddy ocean outside. This ocean water is dirty and swarming with all kinds of

dangerous germsbut we have no choice, do we?

An outdated taxation system encouraging evasion and fuelling the parallel economy, a perpetually cash-

strapped government, reduced social expenditure causing suffering for the impoverished millions andunfavorable conditions for business and industry

That then is the Economic Reality of our beloved nation


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The fiscal deficit leads to restricted government spending on infrastructure e.g. power and water

shortages, bad roads, inadequate railway network, grossly underdeveloped ports and so on. This, in turn

leads to an uncompetitive local industry. On the other hand, the fiscal deficit restricts subsidies to be

given for agriculture, on which most of our rural economy is based. As the Agriculture Sector fails, ruralpurchasing power is directly affected and as a result, from our large rural economy, there is very little

demand for goods and services. This also hits the local industry. The government seeks to fill the fund

gap with foreign investmentsbut these come at a price. As borrowers, we are obliged to accept the

investors interests as paramount, and that is usually at the direct or indirect cost of the local industry and

trade. Finally, the combined effect of all these three factors causes a lot of local businesses to fail,

causing high unemployment. And high unemployment leads to social insecurity.


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We are now so used to the fiscal deficit, that we have accepted it as a fact of life. Our budget is a deficit

budget. Some common measures taken to bridge the deficit have an inflationary effect. The natural

response to inflation is hardening of the credit policy. As credit gets scarce, lending becomes tighter.

Instead of aiding credit creation and expansion, banks tend to conserve their funds and become veryselective in their lending. As a result, the economy starves for capital. The direct impact is on business

growth and the GDP growth slows down. As the business environment worsens and cash flows dry up, a

lot of businesses fail and many loans become non-performing assetsthat is, they become bad loans

and have to be written off. This is a direct loss for the banks, so they tighten lending norms even more

and the cycle goes on... Failed businesses mean unemployment and social insecurity. The overall poor

economic activity results in reduced purchasing power and therefore low demand, further slowing down

the GDP growth.

Reduced growth means less revenue, which means the fiscal deficit continues.


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The shortage of funds leads to internal borrowings. With the given shortage of tax revenue, these funds

borrowed internally are used for non-developmental expendituresuch as repayment of debt and interest

on debt. And the fiscal deficit continues


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When the Government enters the market with an eye on mobilizing and attracting peoples savings, it has

advantages which no bank can ever hope to match. For instance, Government can offer: tax rebates and

exemptions along with high interest rates. Banks can compete in this struggle only by offering even

higher interest rates on the deposits. Result? Obviously, bank lending rates go highersince the bankssurvival is linked to the difference between borrowing and lending rates. Finally, the Indian citizen is stuck

with some of the most expensive capital in the world.

On the other hand, external borrowings directly eat into the business potential of the local banks. High

interest rates are rendering our banks uncompetitive globally.


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When all means of borrowing and revenue generation still prove inadequate to wipe out the fiscal deficit,

there is no option left but to disinvest - sell valuable assets, such as Public Sector Units. Vast industrial

assets created out of hard earned money of three generations of taxpayers are sold to the Private

Sector. As a result, Government Control is lost on the pricing of several essential commodities such asoil, medicines etc. This has a direct impact on the purchasing power of the weaker sections of society.

Another aspect of disinvestment is the inevitable downsizing of manpower, which is actually a threat to

organized employment.

Finally, the combination of fiscal deficit and the pressing need for investment in infrastructure has led to

the birth of the Public-Private-Partnership concept. In simple words, it is nothing but the government

using its powers to allow private companies to build infrastructure and then recover their investment with

profits from the general public for the next two or three decades. Adverse impact of such Public -Private-Partnership is also felt greatly by the weaker sections of society.


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This is difficult to believe, but it is an unfortunate fact that in its desperation to raise funds, the

Government actually promotes many anti-social businesses! For instance, the sale of Gutkha and such

other harmful products have a direct ill effect on public health and destroy families, but it is overlooked

because it is a major source of revenue. Then, the government actually runs lottery schemes andencourages gamblingpurely for the revenue that it generates. As a result, millions of able-bodied youth

are addicted to this state-run gambling. Lastly, the government gets huge revenues from the indirect taxes

levied on petroleum products such as petrol and diesel. Therefore, instead of investing in and promoting

large mass transportation systems, the government encourages the automobile industry and cheap cars.

Every litre of petrol sold means more revenue for the government. Unfortunately it also means increased

dependence on imports and more losses to subsidize, and that defeats the whole purpose of stimulating

the sale of petrol in the first place


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On one hand, the hard credit policy and shortage of funds is strangling all economic activity. On the other

hand, because of the negligible use of the banking system in rural India, farmers have almost no credit

registration and therefore credit history. As a result, most of them are simply not in the reckoning for

disbursal of loans through the formal banking system. So what options does a farmer have? The localmoneylender, of course. At exorbitant and unfair interest rates - but at least it is available. Unfortunately,

such borrowing is usually impossible to repay, and usually ends in a tragedy. Farmers suicide

Is it so difficult to understand now, why more than one hundred and sixty rural districts are in the grip of

the Naxal movement today?


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Every year, the fiscal deficit triggers a fresh bout of tinkering of the taxation system. Rather than any real

analysis and corrective action, incremental and superficial changes are tried on the same old failed system.

Years of such tinkering has resulted in a completely flawed taxation system, which naturally encourages

evasion.High denomination currency of face value 100 Rs. and above, is introduced to bridge the deficit. Let us take

a look at the effects of this currency. The basic advantage of high denomination currency is that it makes

high value cash transactions easy, since a large amount can be carried with great ease. In addition to this

ease, cash transactions are by definition, non traceable, since unlike in the bank, they leave no footprint.

These properties of high denomination currency make it the preferred currency for storing black money

created out of tax evasion. It also enables corruption and serves as the life blood of the parallel economy.

The other terrible consequence of high denomination currency is grossly reduced use of the banking

system in vast tracts of our country. The direct result of this is the poor credit formation and inadequatecapital supply to the economy.

Corruption and the breakdown of formal systems of governance together fuel further social insecurity. The

prevailing high cost of capital and the flawed taxation system, together lead to high input costs, rendering

our local industry uncompetitive and leading to more unemployment.


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Credit Establishment


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Credit Establishment


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Highest three denominations account for 91 % of the total currency money while 78% of our population earns Rs. 20or less a day.


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Highest three denominations account for 91 % of the total currency money while 78% of our population earns Rs. 20or less a day.


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Characteristics of the Current Taxation System in India:

Narrow base and limited coverage of direct taxation

Direct to indirect ration is 40:60

Inequitable and hence regressive

Non-Productive & irrational nature

Uncertain Inelastic

Uneconomical

Complex nature of taxes

Tax laws open for interpretation


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Direct Taxes [e.g. Income Tax]: A Few in

Number, Visible and Proportional to

Income while, Indirect Taxes [e.g. Excise

Duty, VAT]: Plenty, Heavy, Invisible and

Same Irrespective of the Income.

For example, Cost of Petrol is same for a

Mercedes Benz Owner and an Auto

Rickshaw Owner, meaning, Indirect

Taxes Burden the Poor, making their life

difficult.

Because the whole tax is collected from

only a few, they get heavily burdened

while others, though able to carry a

portion of the tax burden, actually carry

NO tax burden


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Deficit Budgets, Year after Year at all

Government Levels [Central, State and

Local]

Tax Policies Changed Every Year, So

also the Exemptions, All Such Changes

Oft and Unpredictable

Therefore, Long Term Planning of the

Businesses and Industries Impossible


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Quarterly/Half-Yearly/Yearly Tax

Collections

Sheer Variety of Taxes and their inherent

nature of being Open for Interpretation

leaves NO Scope for Elasticity

Where is the scope for changing the

taxes for a small amount of time to see

immediate effects in the tax collection?

Large Number of Taxes, Corresponding

Huge Machinery of Tax Collection and

therefore associated Huge Cost of Tax

Collection


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Both the Government and the

Administration are literally Injecting the

[Tax Collecting] Needles anywhere and

everywhere possible even in a willing Tax

Payer

Yet the Collection is Inadequate and the

Leakage a Lot! This is what is Black

Money!

Even the Best of CAs would not dare to

claim that they have understood a

particular Tax Law Fully!

Ambiguity sort of Inherent in the Tax

Laws

Subjective Nature of Tax Laws

Discretionary Nature


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The role of a banking system can be compared to the blood circulatory system within the human body. Just

like the blood vessels carry the essential nutrients to all the parts of the human body, the banking system is

expected to supply the " capital" to all the individuals and the institutions.

Role of Capital in the economy is like that of the blood in the human body. As blood carries required nutrients

to the individual cell, capital promotes productivity in an economic system.

Any disorder in the circulatory system leads to a disease in the entire body. In the same way, a flawed capitalcreation and distribution system has an equally debilitating effect on the economic system.

The key causes for the current state of the banking system are:

Ease of cash transactions due to the availability of high denomination currency notes.A related fact: Highest

three denominations account for 91 % of the total currency money.

A flawed taxation system compounding the situation by encouraging tax evasion and thereby leading to

generation of more black money

Out of the total transactions happening in the economy only a small percentage is routed through the

banking system The number of customers having credit history is very small

Ever shifting economic and banking policies of the government lead to everyone preferring cash transactions

rather than banking transactions


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Withdrawal of high denomination currency and a cap on cash transaction amount render high value cash

transactions impractical. This will direct most [high-valued] transactions through the banking system. As the

Bank Transaction Tax will be collected on each bank transaction while the total banking transactions grow,

there will be a consequent multifold rise in government revenue at all levels.


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Money used for all day-to-day transactions is termed or . This is nothing but the sum of total

in circulation and all the derivative deposits, that is, the total created through

credit expansion.

We have an of Rs. 11,00,000 Crores in 2008-09.

Now look at the left hand column in the chart. It shows the total revenue of the Centre and all the States taken

together for 2008-09, and we see its composition as a sum of revenue receipts and capital receipts, amountingto Rs. 16,46,000 Crores. Out of this, revenue receipts are about Rs. 10,17, 000 Crores.

After implementation of the ArthaKranti Proposal, all high denomination currency which makes up 91 % of the

total currency money would be deposited into banks as primary deposits. Thereafter, this money would be

white in every sense of the word. Moreover, the old taxation system would have been replaced by the simple

and almost negligible Bank Transaction Tax. Since there would be no reason or incentive to evade, the money

would start moving freely within the systemfor consumption, investment or into savings. Whatever the

purpose, every transaction would generate a Bank Transaction Tax.

Assuming that only 20 percent of the moves through banking system once every day, the tax

revenue generated over a year for the Centre and all the States together would be Rs. 10,44,000 Crores plus

Import Duties, as against the Rs. 10,17, 000 Crores all inclusive yielded by the existing taxation system.

By the same logic, the revenue yield for a transaction ratio of 40% would be Rs.20,88, 000 Crores, for a ratio of

60% it would be Rs. 31,32, 000 Crores And for 80% it would be Rs. 41,76,000 Crores!

These estimates of revenue are extremely conservative as well, since they have been made using the as afixed number, whereas M1 is essentially a dynamically changing number. As the primary deposits start moving,

they will start creating derivative deposits and this will send total M1 upwards with every transaction!

What this means is that the notional tax rate of 2% will not be required the actual tax rate to fulfill our needs

can be !

The actual cheque clearances in Mumbai region in 2007-08 amounted to Rs. 36,85,400 Crores. Share of the


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q g , ,

local government at the rate of 0.35% as proposed, would generate a revenue for Mumbai Municipal

Corporation to the tune of Rs.13,000 Crores, as compared to Rs. 8,550 Crores collected by the present

system through dozens of taxes, duties and octroi.

It is therefore obvious that by shifting the tax base from entities and goods and services to bank transactions,

it is possible to generate a tremendous amount of revenue, without stressing out . This is not amiracleit is sheer arithmetic. All we are doing is shifting and increasing the tax base exponentially -

thereby reducing overall incidence of tax on the citizen.

The government will have abundant funds and the leaking taxation system will be repaired, rather,

inexistent.

Government debts will be repaid on priority. The Fiscal Deficit will become a history. These two factors will

empower the Government dramatically and we shall see massive changes coming in.

. This is already a proven factin thelast financial year, the Government collected almost Rs. 9,000 Crores without any paper work and hassles

through the Securities Transaction Tax alone. Collecting that much money through the other taxes would

entail back-breaking paperwork, wouldnt it?


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This mode and associated ease of collecting the revenue will practically finish all opportunities for corruption.

There will be no incentive for generation of Black Money thereafter. Rather, it is technically impossible togenerate Black Money in the Proposed New System.

This will have a direct and immediate impact on all anti-social and anti-national elements. Their purchasing

power will be destroyed forever and all subsequent movements will become traceable through the banking

system. The menace of fake currency will be brought to an end once and for all. All this will effectively

paralyze enemies of society and the nation and the process of restoration of social security will begin.


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As a part of the Bank Transaction Tax goes to the bank itself as a fee, banks will have an independent

revenue stream. As a matter of fact, their revenue model would change completely and the abnormal

importance of interest rates would come down. As a result, interest rates would come down to globally

comparable rates, and the Indian Banking System would prosper in the global arena.

Low interest rates would mean cheap and easily available capital. The resulting increase in purchasing power

of society would result in a direct increase in the market demand. This in turn would stimulate industry and

trade and generate employment opportunities in large numbers. This would be a very important factor to

reduce unemployment and restore social stability and security.


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The abolition of indirect taxes would bring down prices of all goods and services to unimaginable levels

take a look! This would directly liberate a huge amount of purchasing power and further boost the market

demand.

The abolition of taxes on income per se, would remove the need to manipulate books and show losses or

small profits. The focus of every business would shift to quality excellence and creative innovation, which in

turn would greatly increase the competitiveness of Indian goods in the global markets.


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The sheer simplicity and clarity of the ArthaKranti Proposal enables us to have an equally clear view of

the path to its implementation. It is obvious that:

1. This proposal can only be implemented by the Central Government

2. It does not need any Constitutional Amendment

3. It can be passed as a Finance Bill, as per established practice, by a majority of Members of both

houses of the Parliament and finally approved by the Hon. President of India

This understanding helps us in clearly seeing the challenges ahead.

So how do we, the citizens, get our parliamentary representatives to take this up?

This is the most commonly asked question. The challenge can be cracked with a two-pronged strategy.

An upward effort which involves reaching out to politicians, business leaders, peoples

representatives, bureaucrats, economics / policy experts and all such influential people or institutions

with the sole objective of sharing educating.We have started acting in this direction and made presentations before - some MPs, some influential &

respected people - by now and we are getting a good reception and response, may be because hardly

few people approach them with solutions. However we are not finished on this way, we all need to

ensure that our respective MP is aware of the ArthaKranti Proposal and its importance.

When MPs and experts become aware of this even then why will they take it up?


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When MPs and experts become aware of this, even then, why will they take it up?

When a product is to be sold, what is necessary is the demand for the same. Similarly for Arthakranti

Proposalmany people should demand it. Its need is very evident looking at the so many prevailing

social and economic issues around us. Since the Arthakranti Proposal provides a concrete, time-

bound, assuring solution, such a demand alone would make it happen.

We can raise the demand in various ways as

A nationwide mass awareness campaign run in at least all major languages, using tools such as

books, CDs, films, website, internet and so on

A nationwide advertising campaign run professionally, harnessing Tele Vision and all other

powerful media to generate awareness about our problems and the solution

By spreading the message to as many people as possible, by conveying them the subject and

its importance and also conveying what they can do about it

Sending your respective MP the Citizens Charter of DemandsThis simple one page document [Citizens Charter of Demands] will convey the citizens needs to the

political class in the most legal, peaceful and lucid manner. All one has to do is to sign it and send it or

hand it over to the local MP.

Even if 1% of people raise demand, the representatives cannot disregard it.

Thank You !www.arthakranti.org

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ArthaKranti Presentation With Description

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