[gthang]

Originally Posted by blacksport

Again, don't be sheep, ask questions. It's your money.

It must be disheartening for you and other learned friends who have already analyzed a move by the Government as a failure with their thorough understanding and experience about an unprecedented action.

Sadly, the country is going about its business not paying any heed to you wise folks.

Can't decide which is more entertaining, the hoarse cries or the Government's slick moves.

Cheers

[Samurai]

Originally Posted by blacksport

I know it feels heartening to think of oneself as an altruist, be a sheep to the govt and not question anything they do. But do understand that people who have brought about change has actually questioned govts not obey them. For a start you can browse last year's budget and start pondering where that rupee you had paid as tax has gone. Again, don't be sheep, ask questions. It's your money.

The true sheeps are people who buy conspiracy theories without any understanding. Where do you think the money for public infrastructure is coming from?

Originally Posted by androdev

It is foolish for people to assume that the tax will be paid without increase in prices.

What does this even mean? Paying tax is expensive, so don't pay?

Originally Posted by androdev

Also people are naive in assuming cashless economy results in less corruption/black money/tax evasion, etc. These things will come down ONLY if the enforcement and conviction become credible. Have we have seen any improved levels of enforcement and conviction in the new Govt?

Naive people are those who are commenting without any real experience in dealing with these matters. I run a company in one of the most corrupt districts of Karnataka. Yet, I hardly pay any bribe. At first, various government departments came after me hard, nitpicking on every little details, sending me notices on tiny things. But to their dismay, I chose the expensive route to follow the rules, than the easier route to pay bribe, every time. After a while, they all got the message. Now they put honest officers in-charge of dealing with my company, because I am not worth dealing with. Now they don't bother asking, and I don't give. I can tell up front that paying bribe is cheaper than following rules. That is why corruption is popular. It is surely not because government is bad and people are angels.

Originally Posted by androdev

So many theories about why demonetisation is done!

Theories are handed out to people who don't understand macro economics and finance. Those who understand, can see the reason plainly enough. Nobody has to explain.

[hybridpetrol]

Originally Posted by ptushar

Also, next time you are driving on that 6 lane highway speeding in your car at about 100+ km/hr and feeling happy, please spare a though to those people who honestly paid taxes so that you can enjoy that drive.

In this age, where the media gives latest update on different kind of scandals in the country, big and small, who will give focus to the good things around and what / who made such things happen?
If a Metro project opens in Chennai / Delhi it gets just a brief mention on tv, but an irrelevant topic such as a murder plot of a media tycoon gets focussed for weeks.
Anything positive that is happening around go unnoticed, and those who make it happen and their contribution are taken for granted. The income tax evaders expect the politicians to run a super efficient Government with just the taxes from honest tax payers. If any corruption news (true or not) gets leaked in media, they seem to get more proofs why evading tax is correct.
For the 6-lane road example you quoted, I am sure they have this logic - these are toll roads! More examples:
Sanitation facilities and Waste Management, Govt run schools, colleges, public libraries, parks, street lights, interior residential streets, state and national highways, many subsidies etc. Apart from this national institutes such as ISRO's research facilities, universities, etc.

[mayankk]

Originally Posted by gthang

Can't decide which is more entertaining, the hoarse cries or the Government's slick moves.

Cheers

thanks for bringing some levity in a sombre thread.
For all its purported benefits, the move to demonetise is marked by an inept, unprepared, and confused government and administration. In the meantime a 100cr odd has already been found unaccountably, where the move was said to be a root eliminator. Already?
Slick moves. Oh, stop. That tickles.

[ecenandu]

Originally Posted by Samurai

Theories are handed out to people who don't understand macro economics and finance. Those who understand, can see the reason plainly enough. Nobody has to explain.

Sir, what is your personal take on the whole demonetization move?

For me, as an aam aadmi, the move looks more like to make a statement. The intention behind the move is good but looks like they underestimated the scale of the task. They should have had contingency plans to alleviate the pain suffered by the poor.

I sincerely hope the pain will be worth the effort, for myself and family we are the least affected. In fact, not at all. We currently doing solar installation for 5KW at home and for that we paid via NEFT. For other small cash transactions we have enough change at home.

Regarding black money generation by doctors, I can say what most of the people telling here is true. My dad is a doctor and he is not certainly showing 100% true income to the IT. I always tease him by saying it is not correct but his counter argument is, among his colleagues he pays the most, 'holier than thou' attitude. . There are lot of ways to earn money for a doctor, lot of kickbacks opportunities are there.

Will this move by the government prevent future generation of black money, I don't think so, for that we need a change in our attitude. We need more people like you, Samurai, who takes the right steps even if it is the more expensive route.

[avira_tk]

Originally Posted by Samurai

The true sheeps are people who buy conspiracy theories without any understanding. Where do you think the money for public infrastructure is coming from?

What does this even mean? Paying tax is expensive, so don't pay?

Theories are handed out to people who don't understand macro economics and finance. Those who understand, can see the reason plainly enough. Nobody has to explain.

True sheep parrot the government line without a thought. If you didn't know, massive borrowing funds infrastructure, then it's handed over to election financiers who are legally enabled to collect toll for 15 years when the entire investment is recovered in a maximum of 4 years. These are NHAI numbers, the true sharks get to collect for upcoming improvements too, you would know these things if you were paying attention. Government spending will rise to match income, then further borrowing will happen eventually unproductive spending crowds out private investment, then it'll be time for the next gimmick.

Tax is paid by the end user and its regressive, businesses add taxes to the entire bill of materials, you must have seen a restaurant bill recently? The tax works as an excuse to inflate the bills with no benefit to the customer. Cash has minimal transaction costs and you obviously have no clue about people who earn a lot less than you.

Macroeconomics and finance people at a top B school in Bangalore don't think so highly of the current mess , but I guess they don't have your insight into the grand scheme of things. Can you explain how losing a day's earning to visit a bank will benefit a temporary worker at a textile unit who will lose his attendance bonus as a result?

[Samurai]

Originally Posted by ecenandu

Sir, what is your personal take on the whole demonetization move?

Since this action is so singular, like everyone I took a few days to understand it. It was only after watching for 10+ days, I realised what was the goal. So, posted this on Nov 21st. Check some more posts from me from the same day.

Now you see that currency crunch is an intentional thing to pressure people to move into cashless transactions, especially for large transactions. The government wants you to get fed up of standing in line and start using card/paytm/UPI etc. So they should not increase supply of currency, it will defeat the purpose of demonetization entirely.

Secondly, cashless transactions will bring most people into tax bracket, kicking and screaming. That one is obvious.

Originally Posted by ecenandu

Will this move by the government prevent future generation of black money, I don't think so, for that we need a change in our attitude. We need more people like you, Samurai, who takes the right steps even if it is the more expensive route.

Government cannot depends on goodwill and ethics of citizens for tax collection. Even people who expect government to provide infrastructure and public services, don't feel guilty evading tax. By cutting off cash supply they are forcing people to go cashless, which will reveal the true income of people, with or without ethics.

[ptushar]

Originally Posted by hybridpetrol

More examples:
Sanitation facilities and Waste Management, Govt run schools, colleges, public libraries, parks, street lights, interior residential streets, state and national highways, many subsidies etc. Apart from this national institutes such as ISRO's research facilities, universities, etc.

Absolutely. The problem is that in India, we differentiate the Government from the People. And this attitude of ours makes us believe that the Government is the Ruler and the people are the Subjects. Since we don't associate ourselves as being part of the governance, we feel that it is someones else's job to make this country a better place. We forget that we are part of the governance. Our job is to make the money (both for ourselves and for the government), while the government's job is to spend that money in the most appropriate manner.

Unless we all pay our taxes honestly, there is little this country can achieve. And for honest tax paying citizens like us (who have tax deducted at source), it seems mighty unfair that many rich people actually get rewarded in life for avoiding taxes. And many of these people actually smirk and laugh at those who pay taxes. They get a sense of superiority that they don't pay taxes. This is plain crazy. On one side we want India to be the best country in the world. We want to display our love for the country by standing up for the national anthem, but when it comes to standing up and being counted as a tax payer, then we want to sit down.

Hopefully better sense will prevail in the coming years and more and more people will realise that paying taxes honestly is the best way forward. And going towards a "less cash" economy is a good step forward, though not necessarily the only step forward.

[Samurai]

Originally Posted by avira_tk

Tax is paid by the end user and its regressive, businesses add taxes to the entire bill of materials, you must have seen a restaurant bill recently? The tax works as an excuse to inflate the bills with no benefit to the customer. Cash has minimal transaction costs and you obviously have no clue about people who earn a lot less than you.

You are actually trying to tell an entrepreneur about unfairness of taxation? That is no excuse for cheating.

Originally Posted by avira_tk

Macroeconomics and finance people at a top B school in Bangalore don't think so highly of the current mess , but I guess they don't have your insight into the grand scheme of things.

What's new? You can put 10 economists in a single room for the whole day, and they will never agree on a single thing.

Originally Posted by avira_tk

Can you explain how losing a day's earning to visit a bank will benefit a temporary worker at a textile unit who will lose his attendance bonus as a result?

Can you explain why he should visit the bank at all?

[androdev]

Originally Posted by Samurai

What does this even mean? Paying tax is expensive, so don't pay?

My point is people should also understand that things are going to get expensive. Most people are cheering for cashless economy believing that their doctor/landlord will start paying tax without increasing the price, or that they can register a property without paying bribe. How many customers will move to digital payments once their landlord says they need to pay a rent of 45K by bank transfer vs 35K in cash? There is no free lunch. If you see what I have written I said I support this not because I agree with the prevailing tax regime, but because I would like everyone to pay tax so honest tax-payers do not feel they are being taken for a ride. With black money, consumer is also benefitted at the expense of some poor people who should be getting better education/healthcare.

Naive people are those who are commenting without any real experience in dealing with these matters. I run a company in one of the most corrupt districts of Karnataka. Yet, I hardly pay any bribe. At first, various government departments came after me hard, nitpicking on every little details, sending me notices on tiny things. But to their dismay, I chose the expensive route to follow the rules, than the easier route to pay bribe, every time. After a while, they all got the message. Now they put honest officers in-charge of dealing with my company, because I am not worth dealing with. Now they don't bother asking, and I don't give. I can tell up front that paying bribe is cheaper than following rules. That is why corruption is popular. It is surely not because government is bad and people are angels.

My point is unless there is credible improvement in enforcement and conviction, corruption is not going to stop. You close one channel, they will open other channels. Tax compliance should not be left to individual moral choices alone. There should be strong incentives to do honest business and credible deterrence to corruption - currently both are lacking so I am very skeptical till I see some heads rolling.

I don't want to publish my resume and give myself honesty badges, but everyone pays bribes. I am not talking about bribes paid to carry out illegal stuff but the stuff you pay to get your property/car registered, to get various licences/permits to do business, etc. You may not pay directly, but someone pays on your behalf and sends you a proper bill.

Not many realise that an officer gets a particular posting on "pre-payment" of bribe and is given a tenure of say 3 years. He needs to recover what he has paid and also book some profit. In addition, he is given targets to contribute to the minister's kitty. I mean it is so hard-wired and that babu wont spend a CPU cycle of his brain unless he smells money. Superficial actions can hardly rock the boat.

Also running a manufacturing type of business is much harder than a software business in terms of touch points with Govt and scope for ambiguity in terms of tax liability. I can only imagine what it takes to be a honest real estate builder or a civil contractor!

That's a long rant! Obviously we all have very strong feelings about this issue but unless I see punishment being meted out, I am not going to drink the kool-aid.

Theories are handed out to people who don't understand macro economics and finance. Those who understand, can see the reason plainly enough. Nobody has to explain.

I am happy to indulge in general banter but don't plan to get my 'macro economics' enlightenment on team-bhp.

[hybridpetrol]

Originally Posted by ecenandu

Will this move by the government prevent future generation of black money, I don't think so, for that we need a change in our attitude. We need more people like you, Samurai, who takes the right steps even if it is the more expensive route.

Attitude change will happen gradually and with right steps, it will happen sooner. If all the loopholes to bribe are plugged, then people must follow the rules to get things done. If people are asked to follow rules for a year or two, they get used to it, and they will see there is no point in bribing someone to get the usual things done.
Similarly, those who have been living off the bribes would have already found themselves in jail or found something better to do for their earnings.
We should realize that we are at a tipping point in the history where very drastic things can start to unfold for a better tomorrow. Let us focus to pay by cards / online transfer wherever possible. We will know that we can live a comfortable life without having to withdraw a lot of cash. One more point: Everyone can take care of their lives. Rich or poor. So, let us focus on our own lives and see how best we can live with as less cash as possible. If we are really concerned about the poor people's life, we should get down to work and teach some really poor people how to run their daily life without waiting in ATMs.

[poloman]

Originally Posted by androdev

How many customers will move to digital payments once their landlord says they need to pay a rent of 45K by bank transfer vs 35K in cash? There is no free lunch.

This is exactly what the debate is all about. If you reduce the availability of cash the landlords will refrain from this line of talk. It is either you take it or we we will leave since not enough money is the system. There is no much option for him since everyone is in the same boat and he won't get a tenant with 45K liquidity now.So people should take this as an opportunity to flex their digital muscles rather than meekly surrendering to the cash hungry landlord as in the past.
There was an argument about doctors and others increasing their fees. As if they were not increasing before. Every year they increase their consultation fees min 20-30%. Atleast the country and exchequer will benefit if the transactions are made white.
Every move against the black money will have side effects. Atleast we can see how deep rooted corruption is ingrained in our genes from some posts even in this forum. Some are openly endorsing the black economy and making clear they prefer it that way. Only God can save this country with such distorted line of thinking.

[Samurai]

Originally Posted by androdev

How many customers will move to digital payments once their landlord says they need to pay a rent of 45K by bank transfer vs 35K in cash?

Like most people, you are only looking at short term effects. One doesn't get 45K by demanding it. One needs look at the demand curve too.

Many economists are also screaming about short term effects instead of long term effects. For example, there was this article last month by an economist called Arun Kumar who predicts economy slowdown, especially in real estate where huge amount of black money is involved.

At first, yes. However, here the effect is not one-sided. Usually, the seller waits for a black moneyed buyer to get a higher price for his property. This is what put the salaried guy in a handicap in comparison to black moneyed guy. However, the demonetization puts everybody on a level playing field. Now the seller is aware that very few buyers have black cash on hand. If he waits for the black moneyed buyer, he will wait forever. So seller will have to drop his price eventually. While some may remain stubborn and not drop the price, most will be forced to do it once they come to their senses. Especially builders will drop price, because of rising inventory.



So lack of cash bills will cause 2 things in this order:

1) Makes most buyers afford less, which makes the demand graph to move left (D1->D2). This causes the quantity move from Q1->QT. This is what Arun Kumar is talking about. The slowdown in short term.
2) Force most sellers to drop price, which makes the supply graph to move right (S1->S2). This causes the quantity move from QT->Q2. This is what he is not mentioning. This is the recovery that pushes the Q back towards Q1. Q2 may not be exactly same Q1, because of irrationality of people. But that is the general effect, the intended effect.

Therefore, the net effect is prices fall while the transactions slowly creep closer to original level.

Arun Kumar is deliberately overlooking this two way effect because it doesn't fit his narrative. He obviously knows this, but doesn't mention it.

Originally Posted by androdev

Tax compliance should not be left to individual moral choices alone. There should be strong incentives to do honest business and credible deterrence to corruption.

I made the same point in the last para of this post.

Originally Posted by androdev

I don't want to publish my resume and give myself honesty badges.

I don't expect you to, not everybody will have first hand experiences. But I expect logic, with strong economics basis.

Originally Posted by androdev

I am not talking about bribes paid to carry out illegal stuff but the stuff you pay to get your property/car registered, to get various licences/permits to do business, etc.

If cash availability is severely limited, how will this payment happen like before?

Originally Posted by androdev

Not many realise that an officer gets a particular posting on "pre-payment" of bribe and is given a tenure of say 3 years. He needs to recover what he has paid and also book some profit. In addition, he is given targets to contribute to the minister's kitty. I mean it is so hard-wired and that babu wont spend a CPU cycle of his brain unless he smells money. Superficial actions can hardly rock the boat.

All this is known to everybody. But tell me how this works in the future when the cash availability is limited?

Originally Posted by androdev

I can only imagine what it takes to be a honest real estate builder or a civil contractor!

It was impossible until now. It has become very hard to pay bribe because of limited cash. So related departments are very concerned now.

Originally Posted by androdev

I am happy to indulge in general banter but don't plan to get my 'macro economics' enlightenment on team-bhp.

Unlike most who become economists overnight after Nov 8th, some of us discussed economics on Team-BHP since long ago.

[sammyboy]

Originally Posted by Samurai

I

When any operation happens at a massive scale, you can't expect absolute compliance. There will be leaks in lots of places. Therefore, anything that happens in a demographic scale, can only be measured using statistical calculations. If the number of cases of fraud are in the extremities of a normal distribution, it doesn't mean the operation has failed. Therefore, anecdotal cases of fraud doesn't matter in the overall picture. Whenever I see somebody pointing at a case and lament that the demonetization has failed, it makes me think he doesn't understand statistics.
.

I can't really understand what I said made you infer that I either don't understand statistics or am saying the operation is a failure. There are many cases of the note rackets being busted being reported in the news , that frustrates me. Simple . No offence but let's not go all over the big picture and all that from a simple rant . I didn't realise we are demonitizing rants 😬
Thank you .

[hybridpetrol]

Originally Posted by androdev

Most people are cheering for cashless economy believing that their doctor/landlord will start paying tax without increasing the price, or that they can register a property without paying bribe. How many customers will move to digital payments once their landlord says they need to pay a rent of 45K by bank transfer vs 35K in cash?

Assuming you are staying in rented place, suddenly if your landlord increases the rent by 30%, will you pay him without question? I would say time to vacate! Majority of the landlords would accept digital payments if you insist that you can do only on-line transfer. Since the rental property prices in an area are based on demand, it depends on your (and all your neighbours) willingness to pay 30% more rent.
If you are stuck with a landlord, who expects plain cash even now, you can educate him on using digital payments if he is not aware of online payments or consider moving out if he is crooked enough to purposefully put you in unnecessary difficult situation. Other option is to give him a with-drawable cheque, which he can handover to the bank and withdraw by himself.

While all these, and many are options available to us, reasoning out that, helping someone evade tax is no excuse. Within our influence whatever is possible by us, we should try and help more people to obey tax rules. This will make it easier for Governments to devise schemes.