Transaction Value Tax: An Alternative Tax Regime for India

The conventional taxes with diverse bases such as income, wealth, trade, services and movement of goods have, over the ages, have succeeded only in complicating the lives of both tax payers and payees. Innovations such as the value-added tax (VAT), although theoretically sound, have proved to be not easy to implement and administer, especially in India. Given this background, a new form of taxation with a universal base namely the value of economic transactions, can be a viable solution. Already, a version of the transactions tax called the Automated Payment Transaction (APT) tax is under serious consideration in some developed countries. This paper examines the desirability and feasibility of replacing the present conglomerate system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes in India with a single comprehensive revenue neutral Transaction Value Tax (TVT).