Economic Highlights

New Delhi, 3 April 2017

Finance Bill Passed

TAX TERROR MAY MOUNT

By Shivaji Sarkar

Finance Bill 2017 has moved beyond its customary role to make major amendments and linkages. The changes are beyond the monetary provisions. It is not for the first time such a route has been adopted. Earlier too it was done for creation of an independent agency to manage government debt, the Monetary Policy Committee to target inflation and the merging of the Forward Markets Commission with the securities regulator.

The Finance Bill is a money bill since it gives effect to tax changes proposed in the Union Budget. A money bill is defined in Article 110 of the Constitution as one which only contains provisions related to taxation, borrowings by the government, or expenditure from Consolidated Fund of India. A money bill only needs the approval of the Lok Sabha, and is sent to the Rajya Sabha for its recommendations. Even if the Rajya Sabha makes amendments, it goes back to the Lok Sabha, which as it did now, can reject the amendments.

The Opposition of course made a hue and cry. Its criticism was restricted to government adopting an unconventional route for making legislative business. In addition to tax changes, Finance Bill, 2017 amended several laws including the Securities Exchange Board of India Act, 1992 and the Payment and Settlements Act, 2007 to make structural changes such as creating a payments regulator and changing the composition of the Securities Appellate Tribunal.

The most debated was making Aadhaar mandatory for PAN and income tax. It may expose a citizen to unscrupulous hackers. Though the system is said to be foolproof, the recent incidents of some banks misusing Aadhaar shows that people are at risk. The leaking of former cricket captain Mahendra Singh Dhoni’s personal details by a sanctioned Aadhaar enrolment agency is stated to expose a deeper flaw in the identification project’s data collection and storage systems, with experts saying no citizens’ private information is safe.

Aadhaar creates a data trail and virtually pips into the deals made by an individual. While the intention is to tackle the few non-tax-compliants, there is said to be an uncanny situation. A future government can make use of such information for a motive other than that is being stated now. An income tax paper itself is a public document. Linking it to Aadhar increases the risk. It may include blackmailing of individual or corporate as well as throwing critical information to international fraudsters.

No digital data is considered safe, least of all, that exposes one’s financial details. The authorities need not look to the criticism from a mere political angle. A rethinking is needed. Some experts apprehend that even information of some government functionaries may be at risk, at least theoretically.

Though no government accepts it, the leaks on some international systems, are attributed to the digital trails. The rules say that failure to give iris and biometric linked number would lead to invalidation of PAN. It possibly needs a rethink. It would lead to harassment of citizens.

Apparently, it is the handiwork of the bureaucracy to cover up their failures in locating shady deals. It empowers the bureaucracy. It also shows that the system distrusts everyone in the society. This may have serious fall-out and lead to angst. An act that has such wider ramification should have called for a wider debate.

Nobody can ensure that it would not lead to unscrupulous ways to be taken by the authorities. The note-ban has reportedly led to increase in the “legitimisation” charges several fold, harassment of individuals and business people. More stringent the policing, higher are the chances of corruption. In this case too, common taxpayers may have to pay and hush up. Such provisions increase graft and the black money that the nation wants to end. Yes, it adds to tax terror.

The PAN itself is enough. Linking it to another card is superficial. Private medical institutions take money through cheques and turn that into black. Can PAN or Aadhar prevent this? The business community is concerned over restriction of deals in cash beyond Rs 2 lakh. The special investigation team had put it at Rs 3 lakh. The wholesale business though itself routes most businesses through banks, but still majority of these take place through cash at least up to Rs 5 lakh. It makes transactions fast and the businesses do not have to run for defaults. The reduction of limit and stringent provisions again leads to avoidable harassment.  

Parliament’s own research system, PRS, is skeptical over the Finance Bill, 2017 making structural changes to many laws. Parliamentary committees allow for a forum for detailed scrutiny, deliberations and public consultation on proposed laws. “The opportunity to build rigour into the law-making process is lost if such legislative changes are not examined by committees”. 

Amendments to the Finance Bill seek to replace certain tribunals and transfer their functions to existing ones. The rationale behind replacing these Tribunals is unclear. For example, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) will replace the Airports Economic Regulatory Authority Appellate Tribunal. It is unclear if TDSAT, which primarily deals with issues related to telecom disputes, will have the expertise to adjudicate matters related to the pricing of airport services. Similarly, it is unclear if the National Company Law Appellate Tribunal, which will replace the Competition Appellate Tribunal, will have the expertise to deal with matters related to anti-competitive practices.

Tribunals affected by the move include those before which the Central government could be a party to disputes – such as those related to income tax, railways and administrative matters. Parliamentary procedure requires wider discussion to understand the moves. The political leadership of a government is trusted, but often the bureaucratic process leads it to take decisions, which may not always be in the interest of the people. The leadership has to be cautious.

The aim to reduce cash political donation to Rs 2000 looks pious. However, its practicability has to be looked into. The bogey of black money trail has constricted open discussion. Finance Minister Arun Jaitley’s conversation on the issue also stated the reservation of political parties as political bonds are a grey area. The move has not been openly opposed or criticised by any party. But it certainly needs a deep insight to prevent creation of a devious method. Budget secrecy is a sham. It can go through a process of open discussion, which can lead to better decisions. ---INFA

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