Finance minister Arun Jaitley has done well to term the move of senior tax officials in Mumbai ‘an act of insubordination’ and to talk of how ‘officers indulging in acts of indiscipline would be subject to Conduct Rules’.
Finance minister Arun Jaitley has done well to term the move of senior tax officials in Mumbai ‘an act of insubordination’ and to talk of how ‘officers indulging in acts of indiscipline would be subject to Conduct Rules’. According to a news report in The Economic Times on Thursday, after a tax official was transferred, some of Mumbai’s top officials met to discuss revenue secretary Hasmukh Adhia’s interference in ‘operational matters’. Ironically, given how the Tax Administration Reform Commission (TARC) has been so scathing of their functioning, the taxmen quoted selectively from a TARC report to argue for abolishing of the revenue secretary’s post and, according to ET, passed a resolution saying “The DoR (Department of Revenue) has no power to administer direct or indirect tax and its functions in respect of these acts are restricted to replying to questions thereof to the Parliament … has no role in the administration of the Indian Revenue Service, income tax, or customs or central excise”. While selective quoting from the TARC may give the taxmen’s protest a veneer of respectability, what it hides is the degree of the ‘taxtortion’ that has now become almost a routine practice—though the retrospective tax gave India a bad name, tax terror is not restricted to just this.
While the rise in transfer-pricing additions by R2.23 lakh crore between FY12 and FY15 is a sign of this, in the most recent case, an assessing officer in Mumbai slapped a R10,000 crore advance tax notice on India’s largest bank—while SBI protested against this, it was asked to pay up within a day. Needless to say it did this and, after a few days, it was refunded R9,500 crore. Imagine the fate of lakhs of taxpayers who do not have access to the large sums demanded of them, or the ability to fight battles in various tax fora. Given it is the country that suffers due to the actions of the taxmen, it is not surprising prime minister Narendra Modi is keen to fix this—as part of this process of getting taxmen to fall in line, he has decided to use their success levels in winning tax cases in courts as one of the yardsticks to evaluate them; a total of 33 officials have been asked to prematurely retire using a relatively unknown clause in the rule book. That is why revenue secretary Adhia conducts a video conference with officials on Saturdays—that in itself is a measure of how seriously he takes his job—and clearly many of them resent the very public stick he wields.
The taxmen are obviously right in arguing that tax targets need to be realistic and that excessive targets are one of the reasons for their high-pitched demands—to that extent, both CBDT and CBEC have to be accorded a more central role in fixing targets, if they do not already have this. The taxmen are also right that Adhia-style micro-management is not a great idea. But if their own bosses in the CBDT and CBEC are not going to pull them up for ridiculous tax demands and guide them on what correct tax treatment should be—possibly because board-level officials tend to side with their tax officers—this has to be done by the revenue secretary. Taxmen only need to look at how the arrears are ballooning—from R8.28 lakh crore at the end of FY15 to R9.3 lakh crore by April 1, 2016, and to see the abysmal share of cases they win in court—to know how dysfunctional their work has become. As has been done by asking non-performing officials to take premature retirement, finance minister Jaitley would do well to ensure his words are backed by action even this time around.