At a time when the government’s finances have gone completely haywire, it is also the duty of every tax official—indeed, all bureaucrats—to see how best some of the shortfall can be made up.
The government is probably within its rights to take action against office-bearers of the IRS Association for their FORCE Majeure report which, as the government said, had “created panic and tax uncertainty in the already stressed economic conditions in the country”.
Apart from the fact that releasing the report was against service rules—most people seeing the document felt it was going to be implemented soon since it came from the Twitter account of the IRS Association—the government said the office-bearers had misguided 50 young officers, presumably those who worked on the report that recommended a hike in tax rates, imposition of wealth and inheritance tax, and a Covid surcharge.
Indeed, many believed that the government had actually asked the officials to come up with such a plan, and that the association releasing it was just a trial balloon. At a time when both companies and individuals are reeling from the impact of the virus, and pay cuts and job-losses—at a macro level, the economy is likely to contract in FY21—most are looking for a relief package, not more taxes.
There is, however, the issue of whether the government is guilty of using too much force, as it were. Surely, the government could have politely distanced itself from the report, and left the matter at that? After all, at a time when the government’s finances have gone completely haywire, it is also the duty of every tax official—indeed, all bureaucrats—to see how best some of the shortfall can be made up. Whether the government chooses to go by the advice or not is its prerogative.
More important, does this action signal a change in the government’s attitude that saving the economy is as important a priority as tackling the novel coronavirus, and anything that hurts this will be punished? In which case, if a policy like the imposition of the MAT on FPIs—this made them exit the country in large numbers—is implemented, will the government take action against the officials who proposed it, and perhaps implemented it?
Indeed, there are several such anti-investor policies that this newspaper has been highlighting continuously for many years now, a lot of which, though not all, emanate from the tax department. If this is not the case—and it probably isn’t, sadly—then the action against the IRS officials is likely an overreaction, and more aimed at generating good publicity than anything else.