The tax­man’s roll­back

Pakistan Observer - - EDITORIALS & COMMENTS -

FIND­ING it dif­fi­cult to re­al­ize and com­plete the tar­get, the union Fi­nance Min­istry has tied it­self up in knots on whether a pur­ported tar­get set by Prime Min­is­ter Naren­dra Modi for tax­men was ar­tic­u­lated or not. It has found the ques­tions raised over the tar­get set for the tax­men do not sat­is­fac­tory an­swers for the rea­sons that it is prac­ti­cally not pos­si­ble to broaden the tax base. There was con­fu­sion as on June 16, it said the Prime Min­is­ter had asked tax ad­min­is­tra­tors to bring 10 crore house­holds into the tax net, which would ef­fec­tively dou­ble the num­ber of tax­pay­ers. A day later, the Rev­enue Sec­re­tary de­nied that a tar­get had been set. But the Min­istry is­sued an of­fi­cial clar­i­fi­ca­tion the fol­low­ing day, em­pha­sis­ing that the Prime Min­is­ter had only asked the In­come Tax Depart­ment to widen the tax base and take suit­able ac­tion against tax-evaders. In fact th­ese state­ments have only added to the con­fu­sion and panic over the tar­get and re­al­iza­tion of the achieve­ments on this is­sue. It is not clear why there is such panic about the num­ber, es­pe­cially if it was a mere state­ment of in­tent. As a tar­get, rough or oth­er­wise, it is an am­bi­tious goal for a country where the to­tal tax base (that in­cludes direct and in­di­rect taxes) has grown at a snail’s pace over six decades - from six per­cent of GDP in 1950-51 to 16.6 per­cent in 2013-14. Just four per­cent of vot­ers are in­di­vid­ual in­come tax­pay­ers, well short of the gov­ern­ment’s de­sired 23 per­cent. Given that the Prime Min­is­ter had not set a dead­line for the tar­get, any fears of tax­men scour­ing the streets men­ac­ingly to widen the tax net are mis­placed. Keep­ing in view the av­er­age in­come of ev­ery house­hold in the country it is very dif­fi­cult to broaden the tax net on the whims and fan­cies of the politi­cians. The politi­cians refuse to learn from the past ex­pe­ri­ence in view of the fact there are still 42 per­cent peo­ple liv­ing Below the Poverty Line and go to bed empty stom­ach. The ques­tion of how to raise taxes from th­ese mil­lions of poor peo­ple when poverty al­le­vi­a­tion schemes are to­tally ab­sent and the es­tab­lish­ments have only has­tened to in­crease the gap be­tween the rich and the poor also re­mained unan­swered.

In­dia’s tax-to-GDP ra­tio is far lower than the 21 per­cent av­er­age of its emerg­ing mar­ket peers; its pub­lic spend­ing-to-GDP ra­tio is also the low­est among BRICS na­tions. The country can­not scale up nec­es­sary in­fra­struc­ture and so­cial spend­ing with­out widen­ing its tax base. About 85 per­cent of the econ­omy is out­side the tax net. Even among those who pay taxes, the num­ber of in­di­vid­u­als who earn more than Rs 1 crore a year or pay tax in the 30 per­cent tax bracket is un­re­al­is­ti­cally low. Fi­nance Min­is­ter Arun Jait­ley has taken some steps to ex­pand the tax base - re­plac­ing the wealth tax with a sur­charge on su­per-high in­comes, tax­ing lux­ury car sales to build a data­base of po­ten­tial evaders, and even bring­ing ad­vo­cates into the tax net. But a more proac­tive strat­egy is needed to widen the tax base while pri­ori­tis­ing pub­lic spend­ing on ser­vices that all ci­ti­zens use - such as in­fra­struc­ture, law and or­der, health and ed­u­ca­tion - in a way that the earn­ing classes find value from their tax pay­ments. Tack­ling cor­rup­tion and de­vel­op­ing an ef­fec­tive prop­erty tax regime to curb spec­u­la­tion would not only close av­enues for tax eva­sion but also nudge fence-sit­ting, po­ten­tial tax­pay­ers to­wards the straight and nar­row. Jait­ley had promised that the gov­ern­ment would adopt non-in­tru­sive meth­ods and em­ploy in­for­ma­tion tech­nol­ogy to widen the tax base. With sev­eral more trans­ac­tions now re­quir­ing PAN card de­tails, an in­tel­li­gent datamin­ing ex­er­cise could bring more peo­ple into the tax net faster. By do­ing away with the 10-crore tar­get, the Cen­tre has per­haps missed a trick. Apart from this, there have to some in­no­va­tive schemes so that schemes meant for poor peo­ple reach tar­geted pop­u­la­tion and em­power them eco­nom­i­cally and fi­nan­cially be­sides stress on ed­u­ca­tion and ba­sic healthcare. The fo­cus has to shift on hu­man de­vel­op­ment in­stead of only set­ting tar­gets for tax col­lec­tion when in­come of the peo­ple is not ris­ing. This will add to the con­fu­sion and al­low more tax avoid­ance in­stead of in­clu­sion of more peo­ple in the tax net. — Kash­mir Times

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