The Finance Ministry’s mandate is to shepherd the economy, boost growth, & galvanize development. However, it has become the enemy of the economy.
In the 1972 Hindi film Amar Prem, Kishore Kumar sings for Rajesh Khanna a popular song Chingari koi bhadke… The last stanza has an interesting thought: mazadhaar mein naiyyaa dole/to maanzee paar lagaaye/maanzee jo naaw dooboye use kaun bachaaye? (If the boat gets into choppy waters, the boatman steers it out of them, but what if the boatman drowns the boat?). The Finance Ministry is behaving like that treacherous boatman.
The Finance Ministry is the preeminent ministry; its mandate is to shepherd the economy, boost growth, and galvanize development. Under Arun Jaitley, however, it has become the enemy of the economy and of the people of India, especially those who vote for his own party; it is doing everything to check economic development. The two latest diktats from FinMin prove, if any proof is needed, that it is determined to torment law-abiding citizens and disrupt normal processes.
The I-T department now threatens salaried taxpayers with action under various penal & prosecution provisions of the Income Tax Act.
The taxman wants banks to pay over Rs 6,000 crore in taxes on the ‘free services’ that they provide to their customers. The very idea of paying tax on something given free is preposterous; taxation is always on some monetary transaction, be it the selling of a good or service, or some income to an individual. How could you ask somebody to pay a tax on an activity from which they themselves have earned nothing?
Consider an anomalous situation: a garment maker announces 50 percent sale on the merchandise he wants to sell so that he could replenish the inventory with new stuff. Would he have to pay tax for the money he got—that is, 50 per cent—from his customers or for the original price, half of which he forewent? The day is not far when taxmen would tax the money spent on charity, shraadh, etc.
Worse, the government intends to collect this tax retrospectively; the target is said to be Rs 40,000 crore. Quite apart from the fact that it would be a huge burden for a sector that is already under great stress, banking, it will intensify the incidence of tax terrorism, which has already reared its ugly head. Under Jaitley’s watch, tax terrorism has been revived.
Further, the income tax (I-T) department now threatens salaried taxpayers with action under various penal and prosecution provisions of the Income Tax Act if they under-report their income or overstate their deductions in assessment year 2018-19. It is also trying to bully the intermediaries like chartered accountants. The threat was issued by the Bengaluru-based central processing centre.
This is despite an estimate made by the I-T department which itself says that an individual salaried taxpayer paid Rs 76,306 on an average in assessment year 2016-17, as against Rs 25,753 by an individual business taxpayer. But the taxman’s sentiment is best expressed in the old Pepsi ad: Yeh dil maange more!
Revenue maximization became the prime, if not the solitary, objective of economic policy way back in 2014.
Come to think of it, most I-T payers vote for the Bharatiya Janata Party; and the party leaves no stone unturned to torment them.
The fact of the matter is that neither Jaitley nor anybody else in the government has any idea what economic policy is (senior BJP leader and Rajya Sabha member Subramanian Swamy rightly describes Jaitley as “illiterate in economics). They are like the deer in headlights—nonplussed and clueless. And when such a thing happens in FinMin, revenue maximization becomes the guiding principle, the taxman the key policy maker, and legal extortion the main accomplishment. As Swamy said in an interview two years ago, they “feel anything that maximizes revenue is okay”.
The consequences are baleful: the law-abiding citizens feel frustrated and cheated (while crooks like Vijay Mallya and Nirav Modi have a gala time), economic development is undermined, investor sentiment goes down, and the business environment gets vitiated.
It needs to be mentioned here that things haven’t got out of hand because of Jaitley’s bad health; they had been deteriorating even when he was functioning normally. Revenue maximization became the prime, if not the solitary, objective of economic policy way back in 2014. The recent diktats by taxmen are but the consequences of that policy objective.
Things are getting bad to worse. Perhaps catharsis lies in making them bad to verse: maanzee jo naaw dooboye use kaun bachaaye…
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.