Towards a new direct tax code

The report of the task force on the Direct Tax Code could not have come at a more propitious time. At a time when the economy is staring at recession, positive action on the recommendations of the report, which was presented to Finance Minister Nirmala Sitharaman on Monday, could go some distance in lifting the prevailing mood of gloom. The report has called for rationalization of the tax system. It wants relief in personal income tax slabs for the middle and upper income groups and simplifying various deductions and exemptions. It has also recommended reduction in the corporate tax rate to 25 per cent across the board for all corporate entities, big or small.

This is a salutary call. In the recent budget the top bracket was slapped with a five percent surcharge, a retrograde move going by the negative response of the markets and of corporate boardrooms. This ran counter to the stated government objective to align the corporate tax with that in the east Asian economies. Notably, the report recommends that the tax rate for foreign companies too ought to be reduced to 25 per cent. Foreign companies had reacted badly to the hike in rate in the budget, some of them pulling out money as a result, while others putting on the back burner proposals to invest in high-tax India. A key recommendation concerns the plethora of exemptions in the corporate tax and the disputes arising thereof which result in avoidable litigation and loss of revenue.

Dispute settlement mechanisms ought to be made transparent and the role of tax officials, who behave arbitrarily for extraneous reasons, minimized. Currently the disputed amount of tax is over rupees six lakh crores. Negotiated settlement of the pending disputes might yield a fraction of the stalled tax and the tax authorities could begin anew on a clean slate. The report seeks to relieve individual tax officers of raising demand, instead a designated numbers of assessing officers acting in assessment units should collectively undertake the responsibility of raising demand for taxation.

This will reduce the role of officers in forcing quid pro deals on the assesses. The report also cautions against pressuring income tax officers to meet unrealistic revenue targets. Instead, a concerted effort ought to be undertaken to widen the tax net by bringing into the system those earning well in the informal economy but not contributing their due share to the public purse. All in all, a sensible package of dos and don’ts which should get the urgent attention of the economic planners.

Chidambaram finally nailed

The ugly spectacle of a former Union Home Minister going through unseemly contretemps and evasions to dodge the CBI riveted the nation to its television sets Wednesday evening. A sense of dignity and decency deserted P Chidambaram when he chose to evade the summons and went underground for 27 hours. His haughty mien and a cultivated sense of holier-than-thou was frayed when finally the long limb of the law caught up with him, even if it entailed law enforcers jumping over the locked down boundary wall of his house in a tony part of Lutyens’ Delhi.

The desperation to stay out of jail had led the former Finance and Home Minister to behave like a common criminal. The previous evening the Delhi High Court had denied him protection against arrest which he had had for over a year. Surfacing at a press conference at the AICC office on Wednesday evening to claim that his run from the authorities was in quest for justice masked a self-assumed immunity that he was above the law.

Given that Modi-2.0 has shown a purposeful urgency to penalize the corrupt in various spheres, be it the bank loan defaulters or politicians who had their hands deep in the public till, Chidambaram was mistaken to believe that he could get away after perpetrating a number of scams as one of the key cogs in the cash-and-carry UPA decade.

Indeed, we firmly believe that there has been a grave miscarriage of justice insofar as bribe-takers in the 2-G and Aircel-Maxi scams roam free while the bribe-givers are doing time in jail. The law should have caught up with both. The Congress charade that Chidambaram is a victim of vendetta ought to be dismissed for the nonsense that it is. Far more important is to ensure that the prosecution does not falter in such high-profile cases. It is important to send out a message to the entire political class that its chickens too would come home to roast. No body should feel himself to be above the law.

- S Sadanand

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