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  1. Tax terror: With MAT call, has PM Narendra Modi kept his election-time vow?

Tax terror: With MAT call, has PM Narendra Modi kept his election-time vow?

PM Narendra Modi may have made the 'ending the tax terror' promise, but MAT notwithstanding, this is yet to happen.

By: | Updated: September 2, 2015 4:38 PM
narendar Modi MAT on FPI

Narendra Modi’s Cabinet member, FM Arun Jaitley has appeared to be like any other finance minister in the past, who has been convinced by the Income-Tax Department that what it has been doing is right. (PTI)

Santosh-TiwariThe electrifying 2014 Lok Sabha poll campaign of the Bharatiya Janata Party (BJP) led by Narendra Modi as its prime ministerial candidate had ‘ending the tax terror’ as one of the main promises to spur investment.

But, this is yet to happen. In fact, Finance Minister Arun Jaitley has appeared to be like any other finance minister in the past, who has been convinced by the Income-Tax Department that what it has been doing has been the correct course.

It is in this backdrop that his acceptance of the A P Shah panel’s recommendation of not imposing the minimum alternate tax (MAT) on FIIs on Tuesday, must be seen — if there would not have been a stock market slide, the report would not have even seen the light of the day.

While this decision of no MAT on FIIs prior to April 1, 2015 — it has been scrapped already post this date — will remove confusion to a large extent — there are other issues, the original ones like the 2012 retrospective tax amendment itself and the cases related to it like Vodafone and Cairn, the high-pitched Rs 2.64 lakh crore transfer pricing additions to the MNCs income since FY06, and above all, the high-handed attitude of the taxman that needs to be tackled urgently.

The new Revenue Secretary Hasmukh Adhia now says that the tax cases will be dealt in a manner that will not deter investors. Interestingly, he has also said that ‘identifying bad elements in the tax department and taking care of them’ will be his priority, though he doesn’t agree with the ‘tax terror’ terminology. While Adhia’s resolution is laudable, he must be knowing with his experience that it is not such an easy task.

It is not a question of finding bad elements in the tax department and removing them, it is to do with a complete change in the mindset, which is prevalent in the Central Board of Direct Taxes (CBDT). If he is serious about moving forward in this direction, the revenue secretary must go through the recommendations of the Tax Administration Reforms Commission (TARC) headed by Parthasarathi Shome.

First of all, the taxpayers have to be seen as customers who have to be treated well. Then, there has to be different wings for tax collection and handling litigation. The TARC has suggested a detailed roadmap for restructuring of the revenue department to achieve these objectives and Adhia will do well by initiating this exercise quickly.

As far as cleaning up the current mess in terms of legacy issues (the cases continuing from the previous government’s tenure) is concerned, these cases should be referred immediately to the A P Shah panel so that workable solutions like the one related to the MAT on FIIs are in place, which could be announced in the budget next year.

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