Six months into 2021 and a lot of dead bodies have flown down the Ganga! The rot has set into personal, emotional, and economic environment. With most businesses down and the wheels of fortune jammed, the government has very little options to raise funds.
Let us look at what is happening. The direct tax collection has gone down. This is blamed on lower tax rates, increase in base exemption and relief to senior citizens. This has not resulted in increased spending as was expected. The citizens are still saving or freeing their savings to spend on essential commodities and medicines. The loss sof jobs has also resulted in loss of taxes. The indirect taxes, GST, is stabilising. However, the grand plan of the Government to sell the family jewels has not worked. Instead, the cost of Covid has been inflicted on the economy. The government has promised relief measures and is buying dollars to stabilize the Rupee. Raising fuel prices on a regular basis, increasing the price of booze, and reducing the stamp duty for property registration (to encourage sale of property) can only be a short-term measure. This has already resulted in food inflation. The saving rate of interest has not been touched. The states claim that they have not received their share of GST, hence, they cannot support the health initiatives or even release salaries or pensions. This has further added to the downward spiral of lower spending by the citizens. Added to this is the fact that most businesses have moved online. Further resulting in excess real estate commercial inventory and still lower employment. The government is losing tax revenue as large ecommerce companies have their base outside India.
Remember the story of Hans Brinker? The boy who saved his country by putting his finger in the dyke. That is what the government is attempting to do. Trying to plug in as many tax loopholes as possible.
Where is the revenue? To quote Casino Royale, the Bond movie, “Even accountants can be creative”!
This government is famous for commando action, stealth operations. So, what options do they have? Do you remember the internal, super-secret, paper by the Revenue department that was leaked to the press during the last Covid lockdown? This suggested bringing back wealth tax, estate duty and gift tax? Reducing interest on small savings?
There is a saying in the government, ‘never believe a rumour until it is officially denied’!
The global governments are discussing taxing the rich. Anyone who is not middle income is rich. The government might decide to tax assessee’s who have wealth of more than one property, assets of over Rs. 10 Crore. These could be bank assets, Mutual Fund investments (remember our stock exchange is on steroids!), properties, etc. Similarly, there could be introduction of Estate Duty if you inherit anything over Rs. 1.00 crore. As on date, Gift Tax between close relatives is tax-free. This could be defined within certain fixed limits.
These are my views. Why am I hazarding this guess? The new Tax Return formats want the assessee to file their Balance Sheets. The asset data should be sufficient to trigger off the above. If this happens then the government could be bringing in these measures by December 2021.
The HNI’s have already distributed their assets by forming multiple entities and private trusts. There is no insurance, but it is better to be prepared.
Are you ready for this?
