Pranab rejects Moily proposal of merging CBEC & CBDT

Says current arrangement is working fine, should continue.

Finance Minister Pranab Mukherjee has rejected the proposal of former law minister M Veerappa Moily to merge Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) to curb black money generation.

In his capacity as the law minister, Moily in a letter to Mukherjee, had pointed out that a merger of the direct and indirect tax departments would lead to better information dissemination, co-ordinated effort and professional approach in handling tax evasion, which leads to unaccounted income and black money.

Explaining the reasons for not accepting Moily’s proposal, Mukherjee, in a letter to Law Minister Salman Khursheed, said: “I am not in agreement with the views of the former law minster in this matter and feel that the present system of two separate boards of taxes should continue.”

Stressing that the matter had been examined in detail, Mukherjee said CBDT and CBEC were administered by a single department headed by the revenue secretary, who has supervisory and administrative control over the two boards, and thus, unity of command and complete unanimity in policy formulation.

“The very nature of direct and indirect taxes is quite distinct with two taxes differing in basic philosophy, entities taxed, business processes, technology deployed etc.” Mukherjee said.

The finance minster has further pointed out that the simplification and re-writing of tax laws with the proposed Direct Taxes Code (DTC) and Goods and Services Tax (GST) called for constant and close supervision by separate independent boards.

“In China, there are not only two different boards but two different ministries administer direct and indirect taxes,” said Mukherjee.

Referring to Moily’s suggestion of adopting the UK model, the finance minister said India was far ahead of UK in economic growth rate as well as in revenue mobilisation. “The experience of two separate revenue boards for almost 50 years is far stronger and enriching than that of five years of Her Majesty’s Revenue and Customs (HMRC) whose case has been cited as an example. In fact, HMRC of the UK is similar to department of revenue, ministry of finance, in government of India,” said Mukherjee.

A senior revenue department official told Business Standard that the number of income tax payers was over 30 million and indirect taxpayers over 1.5 million. “This number is expected to grow substantially in the coming years and merger of the two boards at this juncture would not be a good idea,” the official added.