A Comparison between the Automated Payment Transaction Tax (APT) and Non-Cascading Transaction Tax (NCT)
What is Automated Payment Transaction Tax (APT)?
Automated Payment Transaction Tax (APT), is a taxation system, that is in Draft Proposal stage, is proposed to replace all existing taxation systems in the country (Income Tax, Sales Tax, Service Tax, Customs Duty etc…), and happens by applying Tax at Source, and with Tax Value being collected equally on behalf of both parties, w.r.t. the transaction. This is proposed as an alternative Taxation System in USA, by Mr.Edgar L. Feige, Professor, Emeritus of Economics, University of Wisconsin-Madison, back in Year 2005. This can be found at,
https://web.archive.org/web/20120321195121/http://129.3.20.41/eps/pe/papers/0506/0506011.pdf
What is Non-Cascading Transaction Tax (NCT)?
Non-Cascading Transaction Tax (NCT), is an all inclusive taxation system, that is in Draft Proposal stage, is aimed at superseding Income Tax, GST and Property Tax, by Collecting Tax on Credit Transactions, in a non-cascading approach, irrespective of transaction value and the mode of transaction (Digital Transaction / Cash Transaction), while applying specific exemptions to certain kind of transactions, and to specific industries respectively.
The Collected Tax Revenue will be appropriately shared between all the Beneficiaries (i.e., Central, State & Local Governments, in addition to Banks, that facilitated the transaction), this has the potential to root out black money, by including everyone in the tax scope, and is being proposed as an alternative Taxation System in India, by Ideal Nation, in Year 2019. The details of the Draft Proposal, can be found at,
https://www.idealnation.net/2019/04/08/non-cascading-transaction-tax/
A brief comparison between the two taxation system Draft Proposals follows:
| Automated Payment Transaction Tax (APT Tax) | Non-Cascading Transaction Tax (NCT Tax) |
| 1) Proposed to Replace Income Tax, Sales Tax, Service Tax, Customs Duty etc… everything, to establish APT Tax as the Only Tax in the Country. | 1) Proposed to Replace Income Tax, GST Tax and Property Tax, thus NCT Tax and Customs Duty prevails thereafter. |
| 2) A Flat Tax Rate that is marginal in value and that brings everyone in the tax net (w.r.t. taxable goods and taxable audience), 0.27% per transaction, with each party bearing 0.135%. If rate of transactions fall by 50%, then it is 0.54% per transaction, with each party bearing 0.27%. | 2) Similar is the case with NCT Tax as well, Transaction Tax for Individuals: 3%. Transaction Tax for Organizations: 6%. |
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3) Automatically collected at Payment Source
(realtime tax collection), with no deductions, exclusions and
exemptions.
| 3) Tax Collection happens on real-time (with exception of Cash transactions in P2M Scenario / Organization 2 Organization transaction scenario), from the Beneficiary, while exemptions / deductions exists to specific kind of Organizations, as defined below, a) Exemption to Banks, on specific kind of transactions. b) No Tax to Individuals, who sell lands / buildings / flats etc… immovable property, as long as they sell at market price only. c) Conditional Tax Refund (100%) to Non-Profit / Spiritual / Political Organizations, that does timely Tax Payments and Tax Returns. Note: No Tax Refund will be given to Non-Profit / Spiritual / Political Organizations, if timely Tax Returns are not furnished for the recent Assessment Year and the money will be automatically forfeited by the NCT Tax Department. |
| 4) Cash Transactions attracts tax on Credit and also on Debit, to / from the banking system. | 4) Cash Transactions are not allowed for Individuals (P2P) and taxed as reverse charge (similar to GST), in case of P2M / B2B / Organization to Organization Transactions. |
| 5) No Tax Returns to Individuals / Organizations both. | 5) No Tax Returns to Individuals, while Tax Returns still prevail for Organizations. |
| 6) Since Asset Transactions also come into this scope, with APT Tax, Wealthy people pay more tax, since Wealth is directly proportional to tax amount, on this Flat Rate based Taxation System, thus preventing Tax Evasion. | 6) Similar is the case with NCT Tax as well, in case of classifying Asset Transactions, like every other transactions, even though there is a subtle difference. a) No Tax on Individuals on Sale of Land etc…, as long as sale happens at Market Value. Note : When Sale Do Not happen at Market Value, tax will be collected on the total transaction amount. |
| 7) Simple, Comprehensive with happens with minimal administrative and compliance costs. But Cascading of Taxes, is the only thing, that a tax payer has to absorb, specifically in case of P2M & Organization 2 Organization Transactions. Note: The concept of Tax refunds and supporting compliance processes, can be used, when intermediaries are paying APT tax in cascading way. | 7) Simple Comprehensive and Non-Cascading taxation System by nature. But there will be reasonable compliance costs, even though most of the procedures will be automated / semi-automated in the process. Note: With 80% to 90% Cashless Economy as target, the compliance costs will be reduced and the 10% Cash Economy allows the opportunity to handle Cash, in adversary Environmental / War Scenarios. |
| 8) No Exemption to Non-Profit / Spiritual / Political Organizations etc… | 8) Tax will be collected from Non-Profit / Spiritual / Political Organizations, but will be fully refunded (100%), for the recent Assessment Year, and only after they submit Valid Tax Returns for that Assessment Year. |
| 9) Applies on Stock & Bond Trades, along with Foreign Exchange Transactions. | 9) Similar is the case with NCT Tax as well, but Tax will be Collected when the Stocks / Bonds are sold and amount Credited to Individual / Organization. Similarly, Tax Collection happens when purchased Currency is sold and amounts Credited to Subjects. Note: In both scenarios, the Stock Brokerages and Foreign Exchanges pay Tax, while availing Input Tax Credit / Refunds w.r.t. their Charges, for facilitating those transactions. |
| 10) Privacy to Tax Payers, with details available only to themselves, while Tax Amount Summaries be made available to the Government. | 11) While info is to be shared to any Department on a need to know basis, all Access Grants has to be permitted, only when they are within the bounds of Privacy Regulations, as defined by the Data Protection Authority, of respective country. |
| 11) State & Local Property Taxes prevail, so the Income in that segment continues. | 11) No such State & Local Property Taxes will prevail, post NCT Tax Implementation. |
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12) Tax variant of APT tax, that is levied on
international transactions is known as Tobin Tax.
While APT tax goes to National Treasury, Tobin Tax goes to World Bank. | 12) While Tax Identification Card (such as PAN Card) is planned for Foreigners, who reside in particular country, taxation on international transactions has to be done while avoiding any violations w.r.t Double Taxation Treaties, that prevail between different Countries. |
| 13) Affects Short Term Trading, while Long Term Trading can afford APT Tax. | 13) NCT Tax applies on both Short Term and Long Term Trading Transactions. |
This is a Request for Comment to everyone, in the scope of sharing your Feedback / Comment / Suggestion, along with Acceptance / Non-Acceptance, through Comments Section and Like / Dislike options, that can be done by logging in to the Website (with Linkedin / Twitter / Google), on the Policy Reform Proposal, “Non-Cascading Transaction Tax – An Inclusive Taxation Scheme Proposal”, that can be found at https://www.idealnation.net/2019/04/08/non-cascading-transaction-tax/.
