Monday, July 21, 2014


FM must battle ‘Tax Terrorism’
  20th Jul 2014
"PC" aptly stands for both "police constable" as well as our own distinguished former Union Minister for Finance, Palaniappan Chidambaram. During his last tenure in the job, Chidambaram re-instituted the Raid Raj that was a feature of the period in office of a predecessor, Vishwanath Pratap Singh. All too often, influential rivals were able to motivate officials (endowed with hyper-powers over taxpayers by "PC") to raid business and personal rivals. These unfortunates were often forced to remain in virtual house arrest together with their families for days on end, questioned at any time during the 24 hours of the day. Their bank accounts were frozen and their telephones switched off. After a while, reason would prevail on the victim and he or she would begin the process of negotiating a fee (paid in cash, hard currency welcome) so that a business and a life that was gravely disturbed, and on more than a few occasions shattered, could resume. More than the tax rates, it is the untrammelled discretion given to tax officials in India and the propensity of a minority within them to squeeze out bribes which has led to a flood of capital out of the country. India was seen as about an attractive an investment destination for the honest and those unconnected with the Mafia as Rwanda or Syria. Candidate Narendra Modi was forthright on the campaign trail, warning of the perils of excess government leading to a sharp reduction in the quality of governance, and it is good that Finance Minister Arun Jaitley, has publicly proclaimed that the days of the Raid Raj are over and that "Tax Terrorism" will not be condoned. In the flurry of details common in the process of budget-making, the need to make this point forcefully seems to have escaped the attention of those preparing the budget. Not surprising, as officials are never willing to surrender the powers they have.
The coming to office of Narendra Modi as PM represents a departure from the colonial traditions of governance in India, where the government exercises stifling control over the citizen. As one of the Prime Minister's most trusted and valued colleagues, it is welcome that Finance Minister Jaitley has unambiguously declared his opposition to the harassment and victimisation that has become a byword for tax administration in the country. Also, rather than accept the official dodge of a "case by case" consideration of such absurdities as retrospective taxation (which represents a gold mine for chartered accountants, lawyers and of course corrupt officials), need to be eliminated. The Finance Minister needs to make adjustments in the budget so that it reflects more fully the forward-looking vision of the PM and does away with remnants of the dead hand of the same officials who have prepared budget after disastrous budget during the Chidambaram years.

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