The Arthakranti (a NGO working on Economic Reform in India) suggests the proposal of Tax Reform.
In the proposal they suggest that All Taxes and Duties of Central ,State and Local body Government except customs or import duties which functions as International Trade Balancer should be withdrawn and replaced with single point Tax deductible at Source.
The full details & suggestions from the proposal are here:http://arthakranti.org/proposal
Key Points from Proposal are here:-
Would such Tax System Work and stop Tax evasion?
Or since Tax is to be levied on Actual transaction, one can just Note Down (Kind of book keeping of Transactions between Two people) the Transaction between two people (the way it is done in Hawala) and settles the trade between Two people after certain fixed period of Time and pays much less Tax..
e.g. Let the rate of such Single Point Tax is 2% (as suggested by Arthakranti to be Low)
If 'A' pays Rs. 100 to 'B' And after some time (days), now 'B' pays Rs. 200 to 'A'
In these transactions if tax is paid after each transaction, the Government would receive total Rs. 6 (Rs. 2 + Rs. 4) in Tax.
But instead actually transaction money each time, if both A & B decides to just note down the amount of money they owe to other & amount they going to receive and decided they will clear their book after six months (Fixed Period agreed by both).
Then in this case after Fixed period only transaction that takes place is 'B' pays Rs. 100 to 'A' and in this case the tax paid to government is Rs. 2 (Rs. 4 in Tax is avoided)..
This system of Book Keeping Transaction can be easily extended from Two people who frequently transact with each other to any Large Scale using Blockchain technology to note down the transactions (without actually making any transactions) and transaction can be settled in such a way that minimum Tax is to be paid to Government. (The same way Akamai Technology deliver content to the user from Nearest Server).
Does this model for avoiding Tax would work?
More precisely, what are the evasion/avoidance rates for similar transaction taxes that have been implemented in other countries (if any country have implemented such tax)?
Compared to traditional taxes on income, consumption, profits or wealth, how will Single Transaction Tax will perform in respect to Tax Evasion or in curbing Black Money?
Also Does Flat Tax like this would be regressive in nature?