tax regime gone berserk Is this the human face, Mr Chidambaram?

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By R. Balashankar

This is no joke. The money you spend on your vegetables is the taxman'sbusiness. So is your spending on your dhobi, grocery, club membership, petrol, mutual funds, travel ticket, cosmetics and various household items. This is ridiculous to say the least.

Every rupee that you spend and every rupee you earn is the taxman'sworry, if it adds up to Rs 50,000 a year and this has already come into effect from April 1, 2004, maybe even without your knowledge. By year end, along with the tax returns, you have to submit this information in a floppy, preferably in a CD-Rom to the taxman and if not, pay a fine of Rs 100 a day till you furnish the same.

Gone are the days of Saral. It is now tedious. Everybody in the process is coerced into buying a computer and have all personal details fed in. Like it or not, a PC for every house. Has he not fixed zero duty on every imported computer? So both Bill Gates and PC are happy.

Chidambaram'stax reforms would soon start reminding people of Sanjay Gandhi'snasabandi campaign of the Emergency days. When will the government stop treating the citizens like the old colonial masters, who suspected the integrity and honesty of the natives? If Chidambaram is imagining that his new tax regime would be music to the Marxist ears, he is mistaken. The Left has already expressed its doubts. Chidambaram also has plans to spend a couple of crores on a massive ad campaign, to popularise his scheme.

When will the government stop treating the citizens like the old colonial masters, who suspected the integrity and honesty of the natives. If Chidambaram is imagining that his new tax regime would be music to the Marxist ears, he is mistaken.

Globalisation has produced a new breed of politicians who walk in and out of politics as if it is their pastime. Out of government, they are in the payroll of multinational corporations, IMF and World Bank. And they have no qualms about joining the cabinet straight out of the boardroom.

Has he ever thought why India has such a high level of tax evasion? It is the tax structure and the administration that are at fault. Globalisation has produced a new breed of politicians who walk in and out of politics as if it is their pastime. Out of government, they are in the payroll of multinational corporations, IMF and World Bank. And they have no qualms about joining the cabinet straight out of the boardroom. Take the case of Chidambaram, who from March 1998 till May 2004 was in the service of numerous MNCs, representing them in various cases. Can he inspire confidence? He cannot convince; he can only harass.

Instead of the complicated tax slabs and exemptions, which only help the chartered accountants, like in other developed countries, it is time India had a straight forward and simple tax structure making it compulsory for every citizen to give a share of his income to nation building. Instead, the focus is on unleashing more policemen on taxpayers. Twice the Kelkar committee submitted reports on tax reform in the last two years. Its 2002 report was assailed by all sections. The latest is being hailed by Chidambaram as more accept-able. Chidambaram is not a votary of the old tax and spend economics, which the country has got fed up with. What rings loud from this maddening tax short-sightedness is the grand goodbye to the slogan of ´human face in reforms? the UPA had pompously promised. The global trend is to go for least interfering, self-complying tax systems.

Maybe this is a trial balloon. Because ever since the Finance Minister moved the Finance Bill 2004-05 with the clause making it compulsory to file also the computer readable format called Annual Information Return (AIR), along with the tax returns his ministry has been making confusing noises. First it was P. Chidambaram saying that it is applicable not to the salaried class. But only to the high-income bracket. Later it was clarified that the idea was not to harass the taxpayer. Then the Finance Minister asked his taxmen to go after big spenders. His complaint: over 10 lakh people own watches that cost Rs 2.5 to 25 lakh, 25,000 people drive Mercedes, one lakh people annually buy cars worth Rs 5 lakh and above. But only 75,000 people on record have taxable income above Rs 10 lakh annually.

The tax rate in India is one of the highest in the world. It is higher than even most of the neighbouring countries. Widen-ing the tax net is a priority with the government. The government records show that India is a country with a burgeoning 350 million middle-class with high purchasing power. It is with these alluring ads that the government tries to attract foreign investment in the hope of the huge market that India offers. But in the last one decade the FDI has remained static at $ 3 billion per annum. Foreign investors are more fond of investing in countries with dictatorship than democracy. And in democracy a government has no business to snoop on the citizens? private lives.

Higher taxation has always been a prescription with the IMF. They have always espoused organised government spending on social security schemes through increased government taxation instead of encouraging private initiatives and village-level community action schemes. The IMF objective is to encourage the governments of developing countries to spend their resources in relief work through a huge army of bureaucrats rather than spending government money on investments in road building, power plants and other infrastructure development. Equally the IMF wants the government to keep inflation low by reduced government infrastructure spending.

Another compulsion for Chidambaram is to reduce deficit to prescribed IMF limits. The government has to achieve the fiscal targets. The first call in this is to eliminate the Centre'srevenue deficit by 2007-08. High tax revenue collection is the easiest way.

It is not clear if the government has given any thought as to why it has not been able to bring more people under the tax net. Collecting TDS does not need any great talent. The salaried class is a captive tax assessee. Bettering collection and compliance will not be achieved even by the latest move. If that was the case, what about the failure of the existing systems? You cannot put Rs 50,000 in one day in your savings bank account. Every fixed deposit of Rs 70,000 already attracts tax deduction on interests. For opening a new account, owning a vehicle or even a telephone or for a travel abroad, PAN was made compulsory, by 2002 by Yashwant Sinha. Many complai-ned that in the 2002 Delhi Municipal elections and the 2003 Delhi Assembly elections the BJP lost because of the freezing of LTA by the then Finance Minister. Many attribute even the NDA'sloss in the Lok Sabha election to PAN harassment the people had to undergo even in villages.

A reasonable and just tax regime is the key to better compliance. India has through ages developed one of the most advanced philosophies on taxation. While describing the popular reign of King Dileepa, Kalidasa says in Raghuvamsham that the great ruler collected taxes from subjects in order to utilise it for their own welfare like the sun whose rays draw water from the sea not to accumulate and keep it, but to give it back in the form of rains. In Arthashastra, Kautilya has said that taxation should be only as much as a bee sucks honey from the flower. The best system of taxation is that which pinches the least. A simple tax code is the best tax code, both for the government and the people.