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What happens when I move my money from one bank account to another? What happens when I give or take a loan from my wife? What about cash transactions? Many such questions will crop up. BTT seems simple on paper but it could be quite complicated in practice.
While I appreciate the origination of an interesting idea, IMHO this sort of a move might actually work against the banking system in the long term. It is very difficult to make any economy completely cashless and when a levy is introduced on doing cashless transactions, it will surely encourage people to avoid banking transactions and as a result, the number of transactions over time will reduce. Lowering the tax rate is a better solution because it will directly impact the volume of tax payers in the system and once the tax net has widened, the GOVT can look forward to make it a flatter tax regime rather than a skewed/progressive tax system.
Does the BTT mean that every team a person invests his hard earned money into any of the products like SIP or FDs, then he would be charged the BTT of say 1%. Also, when it matures and comes back, the govt again takes away 1%. This is ridiculous. People will tend to move to cash economy. Wen they invest, they would need to go for higher duration products only, to avoid repeat BTT.
Excellent Topic with high level of clarity and examples...