TIOL - COB( WEB) - 486
FEBRUARY 04, 2016
FEBRUARY 04, 2016
By Shailendra Kumar,
Editor
AFTER almost 22 months since the
First Tax Administration Reform Commission (TARC) Report was submitted to the
Union Finance Minister, Mr Arun Jaitley, the North Block babudom sprang two
surprises last Tuesday. Even if we count it from the last Budget Day when Mr
Arun Jaitley in his Budget Speech (Para
117) stated that the TARC recommendations were in advanced
stage of examination, it took more than 11 months for him to design the latest
'surprises'. I am sure it may have failed to surprise many tax administration
analysts as they may not see any foresighted element of organisational reform
in it but this was perhaps the only easy leeway for Mr Jaitley to ward off 'inhouse as well as outside'
pressure demanding implementation of the TARC recommendations.
What were the key
recommendations? - a) Abolition of the post of Revenue Secretary and 2)
Creation of Governing Council; Tax Council and Tax Policy & Analysis Unit.
While talking about the
position of the Revenue Secretary who holds the numero uno position in the Department of
Revenue, the TARC Report observed, "...
he is likely to
have little experience or background in tax administration at the national
level and little familiarity with tax, including international tax, issues that
are increasingly taking centre stage in emerging global challenges in taxation.
Yet he is the final signatory on decisions on tax policy and administration
matters prior to their arrival for the Finance Minister’s consideration."
The Report further notes, "...
this is not the first time that a government committee has found that the post
of Revenue Secretary is superfluous. It was considered by the Tax Reforms
Committee, 1992, chaired by Prof. Raja J. Chelliah ..."
The TARC Report further
underlines that the post of Revenue Secretary does not merit presence in a modern
tax administration. Instead, a Governing Council should be
introduced with the chairs of the Boards alternating as its chairperson. In
this manner, the TARC adds to the tenor of the Chelliah Committee in that India
should benchmark itself with modernizing tax administrations by not only removing
the position of Revenue Secretary but by replacing it with a Governing Council
that should include members from the non-government sector as well. The Report
notes that Governing Council will oversee the functioning of the two Boards and
approve broad strategies to be adopted by the tax administration to fulfill the
objective of a more coordinated approach to the administration of the two taxes
– direct and indirect – and create a structure which is independent. Such a
coordinated approach also improves the focus of the tax administration towards
its customers or taxpayers.
How scornfully both the
recommendations of the TARC were treated by the Government can be seen from the
contours of the two 'surprises'. The PIB Release states that considering the
TARC recommendations, the Government has created a Tax Policy Research Unit
(TPRU) and a Tax Policy Council (TPC). First, there is no notification or
Office Order or Office Memo in this regard in the public domain. The only
document available for reference is the PIB Press Release. Secondly, why were the key recommendations not
accepted by the Government is not yet known. If there is a
valid or legitimate reason for rejection of TARC key recommendations the social
media-friendly Government should share it. The Nation has a right to know why the PMO or the North
Block moved miles away from the key recommendations?
While showing contempt to
the first recommendation of the Shome Panel, the Government has created a Tax
Policy Research Unit under the tutelage of the Revenue Secretary. Strange,
strange & strange!! If the Government is so logically convinced that the
post of Revenue Secretary held by a generalist is so indispensable to our
present system where was the need to set up a Reform Commission? Even if it was
set up by the previous Government, it was a commission of domain experts whose
observations did merit proper and reasoned rejection.
Going by the configuration
of the new hybrid apparatus it smacks of perpetuation of 'extreme administrative feudalism'
being practised by one particular Service in the Government of India. At a time
when the global trend is to move towards specialists in every minute domain,
the NDA Government continues to rest on the shoulders of the generalist Service
which evidently believes in 'territorial
expansionism' rather than allowing the specialists to operate
in their own technical domains. It is shocking that this is how a modern
Government intends to run modern tax administration in India. Ideally, in
today's time, every Government should reduce the space given to generalists and
involve more and more of specialists. No doubt, the generalists have a role to
play but certainly not
in the domain of technicalities.
As per the Press Release,
the TPRU shall comprise of officers from both the Central Board of Direct Taxes
(CBDT) and Central Board of Excise and Customs (CBEC) as well as economists,
statisticians, operational researchers & legal experts. Member (L&V),
CBDT and Member (Budget), CBEC will be the link officer between TPRU and CBDT
and CBEC. The unit will be headed by an officer of the level of Chief
Commissioner at functional level alternatively from CBDT and CBEC for a fixed
tenure, who will directly report to Revenue Secretary. Here, both the Chairmen have clearly been bypassed.
From this information it can be seemingly inferred that the Government has not dismantled or merged the existing
TRU and TPL in the new apparatus. The TPRU is the new body
which will do research and analysis independently. Certain issues of research
might be referred to it by both the Boards and its findings will enable the
Revenue Secretary and the Finance Minister to have a holistic picture of the
tax world.
The fact that even both
the Revenue Boards are often seen struggling to find willing officers to
work with them, where will the TPRU find 20 officers for its research-oriented
activities? Secondly, will the Government be able to hire economists &
other professionals at the market rate? If yes, can the Government discriminate
between its own full-time employees and those on contract? Although nothing
concrete can be said at this stage but my fear is that such a body may not last
for long and may fall in
disuse if it fails to provide meaningful research. In such a
scenario, it may be reduced to a status where it becomes a haven for desperate deputationists
looking for a slot in Delhi for their personal reasons rather than
organisational interests. There are too many such Directorates in the
Government today which qualify as 'placid' entities.
Let's now take a look at
the Tax Policy Council. The TPC will look at all the research findings coming
from Tax Policy Research (TPRU) Unit and suggest broad policy measures for
taxation. The Council will be advisory in nature, which will help the
Government in identifying key policy decisions for taxation. This Council has FIVE generalist Secretaries
to the Govt of India. And both the heads of the Revenue Boards who could
actually contribute to the deliberations on technical issues are going to be SPECIAL INVITEES!! The
topic of discussion at every meeting of the TPC headed by the Finance Minister
would be taxation but without a tax policy expert.
In this backdrop, it may
be pertinent to recall how one particular Revenue Service was recently singled
out for public humiliation by none other than the Prime Minister himself! While
chairing his ninth interaction through PRAGATI — the ICT-based, multi-modal
platform for Pro-Active Governance and Timely Implementation, the PM is
believed to have told the Chairman of the Revenue Board that there are too many
complaints against his officers and the 'chhavi'
(image) of his Department is not good. The PM may be right in his observation
but this does not call for public humiliation of an institutionalised service
which is serving the cause of the Exchequer for several decades. There is no
Government Department or a Service whose members have not been arrested on
corruption charges? If one goes by the latest data of the Directorate of Public
Grievances, the maximum complaints have been lodged against the EPFO, Railways,
Telecommunication, Banking & Insurance. Does it mean that all the officers
in these sectors are equally corrupt and their 'chhavi' is bad? If it is so, does it not
amount to failure of the Government which cannot abdicate its public
accountability by merely humiliating heads of one or two Services?
Going by the growing
consolidation of administrative space by the one particular All India Service
in the NDA Government it may appear to many Govt watchers that a subtle
conspiracy is being hatched against specialist services and that is how the top
layer in the Government has been publicly assailing its own technical arms and
increasingly leaning on generalists to rule or ruin the country. Let's hope it
is not true and the Government takes immediate corrective measures to alter the
growing public perception about the ruthless consolidation of administrative
space by one particular All India Service. But, if it is true, the trade and
industry should be gearing up to witness even the proposed GST system being
implemented by the generalists !!
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