A paper about the measures the government should take to revive the economy amid Coronavirus by a group of 50 young tax officers of the Indian Revenue Service (IRS) Association has completely exposed the socialist mindset of the upper-echelons of Indian bureaucracy. The paper, titled FORCE- Fiscal Options & Responses to Covid-19 epidemic- is a set of recommendations of IRS on revenue mobilization and economic impetus to fight the Coronavirus induced slowdown.
https://twitter.com/IRSAssociation/status/1254279697854332933
The response has three chapters- Domestic Economic Scenario, Tax Administration, and Comparative study on the global response to the MSME sector. In the revenue mobilization part of the second chapter, the officers have gone the Thomas Piketty way and suggested that the tax on individuals, domestic companies, and the foreign companies operating in India must be increase manifolds in order to increase the revenue.
The study suggested that Income Tax for those earning above 1 crore rupees must be increased to 40 percent from the existing 30 percent. “Most high-income earners still have the luxury of working from home, and the wealthy can fall back upon their wealth to cope with the temporary shock,” reads the recommendation.
Moreover, the officers suggested additional one-time Covid-19 relief cess of 4 percent on rich people, which could be used to finance relief work. “The extra revenue mobilized on this account could be between ₹15,000 – 18,000 crores. To mitigate the extra hardship on the middle class, the cess may be made applicable only in cases where the taxable income is greater than ₹10 lakhs,” the paper reads.
The IRS suggested that the Indian government must squeeze the foreign companies operating in India by increasing the surcharge of 2 percent on income of Rs 1 to 10 crore and 5 percent on income above Rs 10 crore.
The basic argument of the paper revolves around the idea that- “In times like these, the so-called ‘super-rich’ have a higher obligation towards ensuring the larger public good”, and this shows the little understanding of modern economics among these IRS officers.
The officers want the companies, which are already on a life-support system after the prolonged lockdown, to pay more taxes, which would kill the already dwindling private investment. Even among the income tax increase on individuals seems irrational as more than one-third of the total income tax is paid by MSMEs which are registered as sole-proprietorship businesses. The increase in Income Tax would kill the very same companies to revive which these IRS officers have written the whole chapter- the global response to MSMEs.
It seems that these IRS officers are not aware of the fact that one-third of Income Tax collection comes from MSMEs. Reading the whole paper, one gets the idea that Karl Marx or Thomas Piketty themselves descended in Indian Bureaucracy to write these absurd suggestions. Capital in the 21st century- a book about the relevance of Marxist ideas for the ongoing century seems to most popular read among the Indian IRS officers.
However, the Union government and finance ministry showed some sanity after the set of recommendations by IRS officers led to a huge uproar in policy and corporate circles, and termed the release of paper as “an irresponsible act”. “An ill-conceived report named ‘FORCE’ put up by a group of officers through IRS Association giving suggestions on increasing the taxes, etc., in the difficult time of Covid-19 pandemic. The release of proposals in the media through the IRS Association’s twitter and the website is “an irresponsible act” of few officers. Neither the IRS Association nor any group of officers mentioned in the said report was ever asked by the Government to give any report on the subject,” reads the statement by Finance ministry.
The IRS is infamous for tax terrorism. In fact, last year in an interview with Economic Times, the Prime Minister had said, “it is a fact that some black sheep in the tax administration may have misused their powers and harassed taxpayers, either by targeting honest assesses or by taking excessive action for minor or procedural violations. We have recently taken the bold step of compulsorily retiring a significant number of tax officials, and we will not tolerate this type of behaviour,” thus assuring the ordinary citizens about how the government is serious about dealing sternly with tax officials that harass honest taxpayers.
Again during his Independence Day speech, he had promised to crack the whip on “black sheep in the tax administration”. And the Modi government has not disappointed either. There were multiple rounds of compulsory retirements in the tax administration last year, with the object of cleansing the bureaucracy of tainted officials at the top level.
If 2019 was about giving a loud and clear message to the tax administration that harassment in the name of tax collection won’t be tolerated, 2020 seems to institutionalise such reforms, and with the introduction of taxpayer’s charter, the government has taken the first step in the direction.
The socialist and colonial attitude of the tax department officials needs to be changed in order to revive the economy, and their training must be improved. The recommended suggestions would harm the economy instead of reviving it, and therefore, the government must be cautious in dealing with such socialist bureaucrats and their ideas.