Last few decades were marked by a series of scams in the country, reflecting the extent and state of corruption at all levels. The old income tax regime encouraged the creation of parallel economy and corrupt practices to avoid tax.
ETCFO: February 10, 2020, 11:21 IST
The fundamental issues of the current government like corruption, cleanliness, economy, secularism and global politics will be judged best by history.
Last few decades were marked by a series of scams in the country, reflecting the extent and state of corruption at all levels. The old income tax regime encouraged the creation of parallel economy and corrupt practices to avoid tax. The Urban Land Ceiling Act led to land fragmentations and benami transactions which could be legally enforced if the source of funds could be established. Civil society has a penchant for reacting to policy changes of regimes in different ways. While it is largely amenable to favourable policies, it also explores means to circumvent unfavourable actions that may hamper its secure functioning.
It has been observed that the government is pushing too many agendas at the same time to curb corruption and related issues akin to putting a running bullet train to a halt. Government will need to display its vision and calibre to initiate a calibrated policy push to enter India into Phase II, a period of massive growth and development that would position India as a global economic and political power. Government will have to demonstrate its intent to execute people-friendly corrective actions for society to respond and change accordingly.
Budget 2020 has clearly been a pro-people and populist budget with a view to address the concerns of stakeholders across diverse spectrums of the economy. FM Sitharaman sought to assuage the fraternity of businessmen and entrepreneurs by assuring them of a streamlined and hassle-free business environment. An emphasis on deploying speedy judicial processes for expeditious contract enforcements and an economy free of corruption was a key theme of the budget. It remains to be seen how these big-ticket announcements would translate into reality.
Budget 2020 also specifically focused on rolling out a new personal tax regime with an onus of placing more disposable income in the hands of the taxpayer. The rationalization of personal tax slabs is hoped to spur per capita spending in the country and put the economy on the path to revival. It is also expected to kickstart the consumption cycle in the country. The abolition of the dividend distribution tax at the company level is a key step towards making the Indian equity market increasingly attractive for foreign investors. Apart from placing more liquidity at the disposal of companies which can be channelized for business expansion and upgrade, the initiative also holds the potential to boost market sentiment.
To start with:
- The government will need to rationalise direct and indirect taxes and overhaul the tax machinery. The tax department should have zero tolerance for corruption not only for taxpayers but also for all those who are part of government machinery and responsible for collection of taxes.
- If the FM wants to ensure that wealth creators are respected and wealth creation is encouraged, the budget should have provisioned the extension of tax concessions as an incentive to high income earners. Levying more tax on those making more money is contrary to the fundamentals of rewarding wealth creators and performers.
- The judiciary and quasi-judicial bodies are flooded with litigations filed by citizens and government departments pertaining to direct tax, indirect tax, GST, non-payment of dues by the government owned corporations for vexatious reasons. Out of the box thinking can lead to quick resolution of litigations. Enquiries/investigations/ claims where the tax and penalty (even if the tax department wins) is below Rs 1 crore and having a cut-off date upto 31st March, 2019 should be ended. This will not only ease the burden of tax authorities but also boost the confidence of investors that the government does not harbour any vengeful attitude. The Lok Adalat route can be explored for bigger cases.