Taxmen Confront Slack Govt

A few incidents in the last few months have put the income tax sleuths on the defensive. First, they had the much-publicised dispute with top-notch public sector undertakings. Second, was the infamous run-in with the political leadership over the tax claims on Foreign Institutional Investors (FIIs) investing through Mauritius.

In both the instances, the tax authorities came under pressure from the political establishment and were the worse off for their efforts.

Now, the revenue department is once again gearing up to confront the political establishment. Their argument: If you don't have the political will, then don't make us break our backs to bring errant ta- payers to book.

 

This was manifest first at the just-concluded I-T commissioners meet. Presided over by finance minister Yashwant Sinha, the meeting saw several officials stress their cause in none too uncertain terms.

In fact, some of the regions in their respective background notes for the meeting were very cutting in their criticism of the Centre for its recent actions.

They felt (if the foregoing samples are any indication) that there was too much kid-glove treatment given to foreign companies, which resulted in large scale tax evasion.

"It is obvious that MNCs have a lot of scope for collection of taxes. This is still virgin territory and a large number of MNCs are not paying their full taxes taking India as a soft country so far as compliance of tax laws are concerned," says the confidential note prepared by the Delhi region.

It then goes on to add in very damaging terms, "Whenever some action is taken against them, they make a lot of hue and cry and even threaten to withdraw from India and take strong action against Indian companies in their country. India as a sovereign country should not allow itself to be cowed down by such threats. A policy decision in this regard should be taken."

The Delhi region, which collects the majority of its corporation tax receipts from PSUs, also remarked caustically on the recent disputes with PSUs. According to them, unlike in the past, PSUs were not willing to pay their dues on the grounds that it would spoil their respective balance sheets. And, where action was taken, the matter was stayed by the Committee of Disputes. The Delhi region submitted to the commissioners: "Whether the PSUs may be allowed to pay the taxes at their sweet will?"

It is not clear whether the political leadership would comply and do the needful. But it is clear that liberalisation is being unfortunately associated with a lax regulatory regime. However, senior officials who guided the reforms process maintain that nothing could be further from the truth.

"Regulation is a critical element of free and fair competition. To relax regulation on the grounds of liberalisation is criminal. They are doing singular damage to the reforms process," they argue.

For the revenue department itself, it is a crisis of confidence. Under political prodding they have complied and called off the heat on errant foreign companies.

The question that begs to be answered is whether this is what is warranted? While one has to guard against misuse of investigating powers, it can't be anybody's case that those violating tax laws should be let off easily or not policed at all.

Already reeling under the various amnesty schemes, which grate against the principles of taxation, the I-T sleuths are up against a fresh challenge.

Significantly, come June 1, it will have a new leadership at the helm of the Central Board for Direct Taxes.

A Balasubram-aniam is likely totake over and her already has his work cut out for him.