Note: The following post was written in response a Question on Quora which talked about a hypothetical situation in which if incumbent Finance Minister of India was to be replaced with someone, who would you want in their place and why?
Dr. Subramanian Swamy.
I would surely want Dr. Subramanian Swamy taking charge of the Finance Ministry. I know that it is very unlikely that the BJP top brass would give him that position in the cabinet for his bellicose and audacious attitude. Yet, I don’t think that there is anyone more suitable for the job.
A noted and celebrated economist that he is, he also champions the cause for the transitioning to Singaporean like direct taxation policy (Which in my personal perspective and knowledge is the best way to go for Indian economy) to set the economy on a self-sustained investment cycle, than the one presently being followed which is heavily dependent on the inflow of foreign funds via mediums like FDI, FIIs, and FPIs.
Swamy’s view about Income Tax is there should be no Income Tax.
Swamy has oft-repeatedly argued for the abolition of income taxes (Singapore didn’t abolish the taxes but kept it very low) as they contribute just about ten percent of overall tax collections. Meanwhile, Income Tax is one of the primary cause because of which people actually generate black income which ultimately finds its way into cupboards, lockers, hidden bunkers in the houses, or in form of gold or real estate investments.
This is the same money which would have easily been deposited in the banks had there been no income taxation. That is the argument which Dr. Swamy underscores upon. This is so because the people deviating funds from banking and investment systems has virulently harmed the national economy. Furthermore, the model proposed by Dr. Swamy talks goes as follows:
Once the Income Taxation is abdicated, to control the excess liquidity in the markets, interest rates have to be hiked, which would channel the excess money into the banking systems, and flush the banks with an enormous deal of capital. Also, the increase in income because of tax abolition and an increase in interest rates would in tandem result in massive surge in savings pan nation.
When savings flourish, a sustainable investment cycle follows.
And any economist can corroborate that when savings in a nation flourishes, a sustainable investment cycle is bound to begin. More are the savings in a nation, more is the capital at hand to invest in needed sectors and markets, be it for the building of the infrastructure of sundry kinds, or boosting the social and private sector growth.
And, once the investment cycle takes off, there is hardly anything that can impact the economy from get going. Also, given the nation will have more of its own capital to utilize, its dependence on Global economy would be diminished, making the Indian economy more resilient and secured from the global macroeconomic fluctuations.
This obviously was a very brief explanation of a wide and diverse taxation reform. Also, this may not please many people. But, it’s a model which works. As I stated above, its a model inspired by the Singaporean economy with just one primary difference that Singaporeans didn’t abolish the provisions of income taxation, rather they minimized it to a really progressive bar.
And, that would work very fine too. But, as far as Arun Jaitley is concerned, he has been largely reluctant to introduce any major changes in the way Direct Taxes work in the country. Maybe he wanted to go that road but didn’t because he had been too busy with getting Goods & Services Tax Act (GST Act) passed and enacted over the past few years. So, probably there wasn’t enough time and resources to get two heavyweight taxation reforms rolling simultaneously.
But, whatever the excuse may be, the thing is that abolition or major reduction and reforms with respect to direct taxation policy can be a game changer for Indian Economy. While the reader may suggest that some other person as Finance Minister can also get through such a change in Direct Taxation Policy. But, I would counter that argument with the following:
I can’t think of a better name than Dr. Subramanian Swamy’s for it has been an idea mooted by him. Also as an acclaimed economist, he has been well-versed with the boons and banes that this policy manoeuvre would bring along, and what trivial factors would have to be kept in mind to ensure a smooth passage and transition, given he has worked on the idea himself for a long time. And, with all of that said, I rest my case.
I support the elevation of Dr. Subramanian Swamy to the role of Finance Minister of The Republic of India inspired by his commendable experience and knowledge in Economics, and his strong grasp with the bugbears which are holding back the Indian Economy in the present. Bliss!