Ending tax terrorism?
August 3, 2014
When I saw the Finance Minister announce for the umpteenth time that he was ordering his tax inspectors to go forth and “unearth” black money, I sent him a text message asking him to call me. He called promptly unlike other ministers in the new government, so full marks to him for this. In the brief conversation we had, I humbly submitted that the Tax Department employed some very, very corrupt officials and that his war cries would only make them behave worse than they already did. These tax inspectors are directly responsible for the ‘tax terrorism’ that the new government promised to end. They harass you if you pay taxes and they harass you if you do not, and nearly always the money obtained to stop the harassment never ends up in government coffers. Arun Jaitley heard me out and said that I should go ahead and write what I wanted to so as to make my point more clearly. So here goes.
It is obvious that the new government is desperately short of money and this is probably the main reason why that absurd retroactive tax has not yet been abolished. Clearly the way to get more money could be relatively easy if more Indians paid income tax, but one reason why they do not is because you need an accountant to help you fill the 30-page income tax form. I have paid income tax ever since I got my first job in The Statesman newspaper 40 years ago, but to this day I need my accountant to fill the form for me. It is long, confused and dense. It contains an endless list of convoluted questions. Only an Indian clerk could have come up with this Kafkaesque document. If I were an American citizen, I would need to fill a two-page form, and if I were British, the form would be slightly longer but so simple that semi-literate Indians could fill it easily.
Since the Prime Minister won the election by promising “minimum governance”, he would do well to begin by simplifying income tax forms. He could then go on to simplifying passport application forms and the total abolition of the arrival and departure forms that Indian citizens fill in every time they leave or enter their own country. To come back though to the income tax form, may I say that even the Finance Minister, a highly educated lawyer, would need the help of an accountant to fill out his tax returns.
Please dear Finance Minister try and file your wealth tax returns online as an exercise to see how devious are the ways of Indian officialdom. Technically this service has been introduced to make life easier for those who pay wealth tax, but the reality is that it makes it impossible. In the case of jewellery, the details demanded of the size, shape, colour, weight and worth of every item are so complex that it is much easier not to pay wealth tax or not own jewellery.
When you next sound your clarion call to “unearth” black money, dear minister, please keep in mind that the reason why this money has turned black is because of a corrupt, obsolete system that badly needs reform. Despite the ranting of that well-known economist Baba Ramdev, most black money is not in foreign bank accounts but under mattresses in our dear Bharat Mata. Small shopkeepers, traders and businessmen remain outside the tax net because none of them can afford the time and money required to file income tax returns. From talking to owners of small businesses I have discovered that they are harassed even if they want to pay their taxes by inspectors who take bribes to tailor their returns for them.
The tax department ‘widens the net’ by conducting raids on movie stars and big businessmen assuming they will definitely find undeclared wealth in their homes. Victims are treated as guilty till they can prove their innocence, and the main beneficiary is not government but those who make up the raiding parties. A report prepared for the Finance Ministry by one of its own former officials, Vijay Kelkar, described tax raids as having no place in a civilised society, but they continue because officials like the power it gives them over the richest men in India. Of course they like the extra money that can be made through them. But, a direct consequence of such raids is that they vitiate the investment climate and this government has already inherited a poisoned investment climate. These raids are reminiscent of the Emergency (remember Arun?) when Indira Gandhi used them to disgrace her political opponents.
Incidentally, it was during this Emergency when I first met our Finance Minister. He was a student leader and I a junior reporter. This is why I write this appeal.