Wish list Not Ful­filled but FM Makes the Right Moves in Bud­get

The Economic Times - - Front Page -

Of the sav­ings and in­vest­ments wish list I had from this Bud­get, noth­ing has been im­ple­mented. Yet I can’t help say­ing that this is a good Bud­get. Of course, there are some caveats, but I’ll dis­cuss that later.

There are two changes in the area of sav­ings and in­vest­ments, both of limited rel­e­vance. One is a change in the rules for Long Term Cap­i­tal Gains (LTCG), but not the one in­vestors were scared of. Ever since the Prime Min­is­ter spoke against this zero tax back in late De­cem­ber, there was wide­spread ex­pec­ta­tion, de­spite the fi­nance min­is­ter’s as­sur­ances that this tax would be brought in. That hasn’t hap­pened. It would ap­pear that the PM’s ir­ri­ta­tion has taken a back­seat to Jait­ley’s sooth­ing words.

The other change is that the Ra­jiv Gandhi Eq­uity Sav­ings Scheme has been given a quiet burial. I doubt whether any­one will lament the thor­oughly use­less scheme that was a prod­uct of mud­dled think­ing in Pranab Mukher­jee’s fi­nance min­istry. I won’t bore you with the de­tails be­cause they are not rel­e­vant any­more. Suf­fice to say that both mea­sures were buried in the an­nex­ure to the Bud­get speech.

The fo­cus on tax breaks for the low­est end of the slabs as well as the smallest com­pa­nies is char­ac­ter­is­tic of this gov­ern­ment. This brings sig­nif­i­cant re­lief to the largest num­ber of peo­ple and busi­nesses at least cost to rev­enue, and that’s the way it should be. The most dis­tinc­tive part of the Bud­get speech was the fi­nance min­is­ter’s de­tailed, data-driven ex­pla­na­tion of how In­dia is largely a non-tax com­pli­ant coun­try. He made the point con­vinc­ingly. It’s shock­ing that at the top end, 1.48 lakh bank ac­counts saw an av­er­age of ₹ 3.3 crore of cash de­posits each dur­ing de­mon­eti­sa­tion and yet there are a mere 1.7 lakh peo­ple in this coun­try who file re­turns show­ing an in­come higher than ₹ 50 lakh. It’s clear that de­mon­eti­sa­tion has trig­gered a huge ef­fort to ex­pand the direct tax base.

If this is done with any kind of ef­fi­ciency, then the coun­try will en­joy the fruits of the de­mon­eti­sa­tion on a per­ma­nent ba­sis. Much de­pends on whether this is done in the reg­u­lar way that rev­enue of­fi­cers work, or if there is some spe­cial ef­fort at work­ing in a clean and ef­fi­cient way. For a gov­ern­ment that has done so many things right, the lack of per­cep­ti­ble change in the set ways of in­come tax of­fi­cers is an un­for­giv­able blind spot. It’s pos­si­ble that Jait­ley is qui­etly chip­ping away at the cor­rupt and in­ef­fi­cient ways of tax col­lec­tors. How­ever, some vis­i­ble ev­i­dence of such an ef­fort would have gone a long way to as­sure honest tax­pay­ers that the bo­nanza of data and in­tel­li­gence that de­mon­eti­sa­tion has pro­vided won’t be frit­tered away in lin­ing the pock­ets of the same peo­ple. The lack of tax com­pli­ance has come about be­cause of an en­trenched nexus be­tween tax of­fi­cials, char­tered ac­coun­tants and busi­ness own­ers.

The most dis­tinc­tive part of the speech was the FM’s de­tailed, data-driven ex­pla­na­tion of how In­dia is largely a non­tax com­pli­ant coun­try

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