Direct Taxes Code Implications on Capital Gains in Stocks

EEE and EET Regime: The modified discussion paper on DTC has proposed to continue with the existing EEE (Exempt-Exempt-Exempt) regime for specified investment schemes such as GPF (Government Provident Fund), PPF (Public Provident Fund), RPF (Recognized Provident Fund), Pension Scheme administered by PFRDA (Pension Fund Regulatory and Development Agency), Term Life Insurance, and Annuity Schemes. In the original draft, the ministry had proposed to adopt EET (Exempt-Exempt-Tax) regime. It is a great relief for the Senior Citizens, as they will not have to pay tax on their withdrawals from PF, or Pension.

The penalty provision has been made more stringent. Penalty for non filing of accountant report has been increased from 50K to 200K. Penalties for non maintenance of documents have been increased (50K to 200K) and non furnishing of documentations (5K to 100K).

"The power to tax real and personal property and the income from both, there being an apportionment, is conceded: that such tax is a direct tax in the meaning of the Constitution has not been, and, in our judgment, cannot be successfully denied:..." Pollock v. Farmers Loan & Trust, 157 U.S. 429 and 158 U.S. 601 (1895)

The IRS would like you to believe that everyone must pay tax. They would like you to believe that the 16th amendment gives them that right and that the law is the IRS code. But according to the Supreme Court, the code is not the law, it is just the regulation and assessment of the law. The law is the Constitution.

The powers of Congress, and the limitations set upon those powers, are set forth in Article I of the United States Constitution. Section 8 specifies both the power to collect, "Taxes, Duties, Imposts and Excises," and the requirement that, "Duties, Imposts and Excises shall be uniform throughout the United States."

Huge financial resource is essentially required to discharge such functions. Optional functions refer to various activities relating to improvement of socio-economic conditions of the people. In relation to such areas of activities a modern government, based on social welfare concepts is required to spend huge fund for development of economic infrastructure in the form of road and railway development, power generation, telecommunication development, educational and health care development and even implementation of various schemes for development of agricultural and industrial sectors of the country.

According to the IRS code for the taxpayer, taxes are paid on "wages" for "services performed by an employee for his employer." This sounds straight forward enough; But what is an employee? According to the IRS code Title 26, Subtitle C, Chapter 34, Section 3401, "Employee includes an officer, employee, or elected official of the United States, a state, any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation." Based on the IRS's definition for employee, are you an employee? Most of us are not. If wages are earned by employees; and you are not by definition an employee, then you are not a taxpayer (unless you volunteer to be one.)

In 2001 a group of THM leaders led by Mr. Robert Schulz from "We the People Foundation", and others from around the country, coordinated a meeting with the IRS, members of the Department of Justice, and a member of Congress to discuss their grievances concerning individual taxes and tax law. It was agreed upon by all parties, the date was set, and it was even arranged to be web-cast live and recorded for posterity. A shrewd lawyer from the government decided they had better have a look at which questions would be asked at this forum, so they were provided a list of 299 questions. The government has consistently stated that the arguments of the THM are frivolous and without merit. They now had the opportunity deliver a knock-out blow and to crush every argument once and for all. Within a week of receiving the questions, the government stated they would not be attending the meeting; and they gave no other reasons.

Congress must resume its' duties of minting US currency, and managing the value thereof, as outlined in the Constitution. If they cannot, or will not, uphold their responsibility, then we must get rid of them and find someone who will!

In the case of Murphy V IRS (2005), the Supreme Court stated: "The Sixteenth Amendment simply does not authorize the Congress to tax as "incomes" every sort of revenue a taxpayer may receive. As the Supreme Court noted long ago, the "Congress cannot make a thing income which is not so in fact." And further in McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 431 (1819), the court stated: "it would not be consistent with our constitutional government, and the sanctity of property in our system, merely to rely upon the legislature to decide what constitutes income." (Bold added)