"The temptation to raise taxes in the given situation was indeed great. But I recognise that the direct tax policy must impart stability and confidence both to individuals and corporates. Therefore, I do not propose to introduce any changes in the rate structure either for individual or corporate taxes. In fact the level for tax exemption is being raised from the existing limit of Rs 40,000 to Rs 50,000." In an instant, finance minister Yashwant Sinha, presenting his debut budget, became a hero.However, the euphoria was to be shortlived. No sooner had the FM announced the above sops than he also went on to add that since India's assessees number less than 1.25 per cent of her population, widening the tax net would be one of the top priority items on the government's agenda. The FA 90 specified that persons earning income below the taxable limit need not file a return at all. The rationale seemed to be to reduce the burden on the already flagging infrastructure. The good was undone when this stipulation waspromptly retracted by the FA91. FA97, with effect from 1.4.97, made it mandatory for a person to file a tax return if he fulfilled any two of the four criteria, namely, possession of a house, subscription to a telephone, spending on foreign travel and possession of a motor vehicle. This scheme was applicable to 12 cities in the country.
The government seemed to have underestimated the enormity of the task involved. First, lists of persons fulfilling each criterion had to be compiled. Then these lists had to be matched with one another to cull out names of those persons satisfying two or more of the criteria. The logistics involved required a very high magnitude of technology and resources on part of the government. Upon realising this, it was announced that at first only those persons who satisfy all the four criteria would be apprehended. All in all, the catch by means of employing this net was only limited to the small scared fish. The big juicy ones who choose to ignore this are still at large. Hence,there has been an effort in this budget to not only make the net stronger but also to augment the waters where such a net is to be spread.
The scheme is being extended to 23 more cities in India. Two additional criteria ie, holding a credit card and membership to expensive clubs are added, making in all six parameters. Lastly, if one fulfills any one of the six criteria, such an individual would be obliged to file a tax return. Sinha has christened this as his ``One-by-Six'' scheme.
Another related measure taken was that henceforth it would be mandatory for all to quote their PAN or GIR numbers in respect of certain transactions namely:
Purchase & sale of immovable property Purchase & sale of motor vehicles Transactions in shares exceeding Rs 50,000 Opening of new bank accounts Investing in FDs of more than Rs 50,000 Applications for telephone connections Payment to hotels exceeding Rs 25,000Apparently, both these measures were not received with thesame nonchalance as our FM delivered them. Reportedly, these were the two main causes for the stock market to spiral down post budget.
One wonders why? This is an exercise in futility on the part of the government. The mind is willing but the infrastructure isn't. Our policy makers seem to be happily strumming out one measure after another paying scant regard to either history or to pragmatism. The finance minister seems to have lost sight of the fact that India just doesn't have the technology or the resources required to implement the scheme meaningfully. The ``two-by-four'' scheme apparently does not seem to have delivered the goods. Merely decreasing the fraction is not going to solve the problem. A little application of mind and sheer common sense would have suggested that the approach should have been modified instead of stretching a failed idea.Having to disclose one's PAN to open a bank account borders on the ludicrous. Or for that matter while applying for a telephone connection. By no stretch ofimagination are these luxuries any more. Netting the small fish is not going to achieve anything. The exotic variety have been forever escaping the tax net by openly flouting the rules and disregarding the authority of the department.
On the other hand, there are several persons wanting to pay their taxes but shy of actually doing so for fear of harassment from the department. It is common knowledge that the passage from the non-taxable to the taxable zone is beset with many hurdles. The gate keepers dig out antecedents. They demand to know the source of application of funds. They do their level best to find out whether the newcomer should have applied for the entry pass earlier. It is possible that this feeling is based on hearsay and newspaper fancy stories.
Nevertheless, it is a fact that such a fear looms large over the heads of persons who otherwise would voluntarily pay their dues. With the passage of time, the problem gets compounded and finally one finds oneself swimming in a pool of black money.Chances are that he/she might take to the waters.Now only if the Government could induce the taxpayers to voluntarily file their returns instead of cooking up coercive schemes which end up spooking the potential tax payer instead of encouraging him.
The powers to be could think in terms of instituting a friendly regime where first time tax payers are reassured that there would not be any unjustified harassment on the part of the Department or the ITOs. I think such measures would go a long way in achieving the end than by Saral.
Yet another measure taken by Mr Sinha reeks of nepotism. The last budget had proposed a service tax on transportation of goods by road, on outdoor catering and pandal contractors. Our FM has gone on record saying that this tax was rightly kept in abeyance since ``it led to widespread resistance and protest''. Note that the rationale or justification of levying such a tax in the first place has not been discussed. Instead, the FM has decided to completely abolish the proposedservice tax on account of ``resistance and protests'' from the affected group.
Displaying astonishing calm and temerity, he goes on to add that this time he proposes to tax some other services. These are the ones provided by architects, interior decorators, management consultants, chartered and cost accountants, company secretaries, private security services, real estate agents and consultants, market research agencies, credit rating agencies, underwriting agencies and slaughter houses using mechanical means. He expects Rs 220 crore to be generated by imposition of this tax.
Now what happens if there is ``widespread resistance and protest'' from the numerous architects, consultants, CAs and agencies etc. Would the device of ``kept in abeyance'' be used this time around also. Or possibly the FM does not expect a repeat performance. A good deal of thought seems to have gone behind the selection of the victims. These groups do not boast of any lobby or union. Then where would the ``widespread resistance andprotest'' emanate from?
Last but not the least, bear in mind that Rs 220 crore are going to be contributed by you, me and others who avail of the services mentioned. We are going to have to pay more for the same set of services. The architects, consultants et al are merely in the nature of conduits through whom the government is going to help itself to the service tax. Long live the common man.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
