The Prime Minister has told us clearly that this is the time when we reform not incrementally, but fundamentally. He has also indicated that the country and the citizens need to have a relationship based on respect, trust, and the pursuit of “ease of living”. It is in this context that this writer submits three suggestions to our Finance Minister. They all have something to do with our taxation systems, processes, and philosophy.
First, Finance Minister Nirmala Sitharaman can announce that in all taxation litigation, be it for income tax or GST, if the government loses the case at the tribunal level, it will not appeal further. This will be opposed by many officials who will argue that tribunal members are easily corrupted. This is a bogus argument. On this basis, they will next start arguing that high court and Supreme Court judges are corrupt. This will never end. Tribunal members are chosen carefully after extensive due diligence. Despite all efforts, a couple of corrupt persons may get in. But that is true at every level.
And undermining institutional credibility based on random suspicions is not the way to build a “Viksit Bharat”. Tax lawyers will oppose this because they make a huge amount of money from court cases. They are a powerful lobby and should not be underestimated. But let us face it — the country should operate for its citizens, not for a small group of rich lawyers. After all, reducing litigations in our clogged court system is a goal that everyone wants to achieve.
The lobbies will then come up with a different ploy. All small tax claims and claims where no “major legal issue” is involved can be let off without appeals. Other appeals should continue — that will be the argument. This is a completely specious argument. If an official stops the appeal for a claim of Rs 90,000 because it is less than Rs 1 lakh, the same day an envious colleague will write an anonymous letter saying that if “penalties” and interest had been included, the claim would have exceeded Rs 1 lakh. Therefore, the official must have taken a bribe. As the amounts go up, these anonymous accusations will only increase.
We just should not have cut-offs based on amounts. Irrespective of the amount, loss at the tribunal means no appeals. No deviations from that. That is the only way to protect honest and competent officials from slander and persecution. The same rule should apply to this totally unwarranted consideration of “major legal issue”. Anything can be interpreted to be a major issue and yet again an honest official will have to live with fear that overlooking even a genuinely minor issue can get him into trouble. So why bother? The only way is to have something utterly simple: loss at the tribunal, and no appeals irrespective of amounts or issues.
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Decriminalisation in tax matters
The next suggestion is to embrace the government’s decriminalisation mantra in tax matters. My friend Manish Sabharwal tells me that there are 38 criminal provisions for tax matters. These arcane provisions are the source of much corruption. People will pay bribes to prevent these absurd and usually unsustainable criminal procedures from being unleashed. If the government can boldly embrace decriminalisation with respect to other laws, the same logic should apply to matters dealing with taxes.
The third suggestion is a radical one, but which I believe is extremely dharmic. Today, tax officials are given revenue “targets”. The simplest way to achieve a target is to make an unreasonable demand. Even if the citizen appeals, she has to pay a big fraction of the demand. Lo and behold — the target has been met. Several years later, the government may lose the appeal. By then, the official has been transferred and probably promoted. The official may even have retired facing no consequences for the illegitimate and outrageous demand made earlier in the career.
Setting revenue targets for officials is something that Bhishma, Thiruvalluvar and Chanakya would have strongly opposed. It incentivises the officials of the state to become tyrants. Their job is not revenue maximisation. Their job is to implement the laws fairly and justly. A country prospers not when every last penny is wrung out of citizens, but when the state takes a reasonable share in a just manner. Chanakya would actually have argued that setting targets would be the kind of measure that increases corruption and injustice. He would have considered it unwise to convert officials into extractors. We should not convert the Indian Revenue Service to which tax officials belong into the Indian Extraction Service.
We are in the period of fundamental reform. We are in the period of increasing respect and trust between the state and citizens. We are in the period where we want to increase ease of living. To these, if we can add our return to ancient dharmic principles, we may end up with a win on multiple fronts.
Jaithirth ‘Jerry’ Rao is a retired entrepreneur who lives in Lonavala. He has published three books: ‘Notes from an Indian Conservative’, ‘The Indian Conservative’, and ‘Economist Gandhi’. Views are personal.
(Edited by Aamaan Alam Khan)