The BJP is likely to drop a plan to promise sweeping tax reforms, including the scrapping or reducing of income tax, a move seen by many as a way of winning over the middle class and urban voters of the country ahead of the national election due by May.
Senior BJP leaders Arun Jaitley and Yashwant Sinha are reportedly at the forefront of the campaign to jettison the proposal, which seeks to replace income tax with a two percent bank transaction tax.
Mr Jaitley, the leader of Opposition in the Rajya Sabha, has said that the proposed changes could blur the distinction between the rich and the poor. The poor would end up paying the same amount of tax as the rich, he said at a function organized by Baba Ramdev on Sunday.
Narendra Modi, the BJP’s prime ministerial face, however said at the same event, “Time demands a new tax reform.” He didn’t specify any measures.
The reforms were suggested by ArthaKranti, a Pune-based study group specializing in tax matters, and became one of the talking points of a panel appointed by the BJP to draft the India Vision 2025 document, to be released before the general election.
The committee is headed by former president Nitin Gadkari, who reportedly disagrees with Mr Jaitley. Touted as a potential game-changer by many in the party, the proposal has been endorsed by leaders such as Subramanian Swamy, besides Mr Gadkari, who argue that it will inject transparency, simplify procedures and generate more revenue.
Mr Gadkari said a bank transaction tax could easily offset the losses from abolishing income tax. “If we apply around 1 or 1.5 per cent of expenditure or transaction tax, then we will get revenue of Rs. 40,000 lakh crore,” he said.
The World Bank ranks India 158 out of 189 countries in terms of ease of paying taxes, which has led to scores of taxation-related disputes.