New year gift of Tax slab modification from PM Modi - FM Jaitley, Wait-n-watch
As refer title , every person assume what is Tax slab for 2017-2018 from BJP Govt. after Cash DANGAL(movie name, act by Aamir Khan). PM Modi need more tax for development and FM Jaitley want formation as per RBI condition....
let see what happen ???, what my thinking i wrote below.....
Modi wants to increase taxes on stock market investors. At least, this was the most common interpretation doing the rounds after his recent speech. Markets tanked on Monday at the prospect.
There's no doubt the government needs more tax money. But they better not fall into the trap of linear thinking...or what we might call 'The Cobra Effect'.
Word has it that when the British were ruling India, they offered a bounty to anyone who brought them dead cobras. The idea was to control the growing cobra population. But the move backfired. Instead of going down, the cobra population went up. Turns out, people started breeding cobras to get the reward. And when the government saw this and cancelled the scheme, all the cobras were released in the wild.
Linear thinking assumes that increasing tax revenue is a simple function of increasing the tax rate. The Cobra Effect, on the other hand, alerts us to the reality of non-linear consequences. What if, instead of leading to increased revenues, the higher tax rates actually lowering revenues?
Arthur Laffer, an American economist and former member of Ronald Reagan's Economic Policy Advisory Board, had an intuitive understanding of the cobra effect in the realm of taxes.
Once, during a war of words about the president's tax plan, he couldn't take it any longer. He ordered for a napkin and drew an elegant chart. No one has been able to present the relationship between government revenue and taxes better than Arthur Laffer did on that cocktail napkin.
The chart was a simple 'inverted U', a hallmark of non-linear thinking. An 'inverted U' has a peak point right at the center and tends to go to zero at both its ends.
The idea is that there exists a certain tax rate at which the government will earn the maximum revenues. And it is the government's job to find this sweet spot. Anything lower than this optimum tax rate and tax revenues would drop. Anything higher and the revenues would still drop as people would start to evade taxes or even stop working altogether.
Whether you implement a 0% tax rate or 100% tax rate doesn't matter: Revenues would be zero. And it intuitively makes sense, doesn't it? Why would someone want to work if the government is going to take away all the income?
Personal income taxes in India were as high as 85% in the 70s. And still, there were people who felt Indian tax rates were too far on the left side of the 'inverted U' curve. That is, they thought tax rates could be hiked even more to reach peak tax collection. But since then, taxes have come down to 30%. And many now feel that tax rates are still too high and should be lowered to reach peak collection.
Either way, there's no denying the relationship between taxation and revenue is non-linear. There is an optimum tax rate. There is a level at which revenues will peak.
As far as taxes on capital gains are concerned, market participants believe they are already on the right side of the curve. Any more tinkering and it may not go down well with investors.
What about personal income tax rates? The slabs have remained constant since 1997-98. Still, they could well be on the right side of the curve; lowering income tax rates could actually end up increasing government tax revenues.
(source :- Equitymaster Agora Research Private Limited)
Will Jaitley oblige come February 2017? If he does and the government revenues do go up, it would be a double treat for the stock markets. Both the economy and the government finances would get a boost.
We see a minor, if not a big, relief coming for the middle-class tax payer. If for no other reason than to ease some of the pain from demonetisation. What do you think? mail me on prabhakara.dalvi@gmail.com.
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