Parliament’s Standing Committee on Finance headed by M Veerapa Moily has found several technical loopholes in the performance of the Finance Ministry for the fiscal year 2015-16 and has also suggested some reformative or innovative measures to improve various aspects like taxation. The report has been placed before the Parliament for the consideration of the House. The report premises the Finance Ministry to do more to get back the unaccounted money from abroad that has remained stashed in foreign banks. It concedes that many desirable steps have been taken by the Minstry in this direction but much remains to be done. It further notes that the Ministry should give utmost priority to the implementation of recommendations of Justice M B Shah’s panel so that black money stashed abroad may be brought to our hand in time. It has noted that a total amount of Rs 4,147 crore was declared during the 90-day black money compliance window, higher than the previously announced amount of Rs 3,770 crore. In regard to GST (goods and services tax), the Committee have noted that the Government should formulate concrete road map and suitable administrative mechanism for smooth roll out of GST. It has to be reminded that GST has remained an explosive issue and the opposition led by Congress is reported to have put many hurdles in the way of Parliament passing the bill brought by the Government.
The Committee highlighted the necessity of increasing the revenue of the Government. This will mean that Finance Ministry should usher in next generation tax reforms by thinking afresh about tax policy or regime, which would lead to transformational revenue generation figures in place of current dull situation and incremental figures of revenue both in direct and indirect taxes. Reflecting on the need of reducing the quantum of unaccounted monies deposited in banks abroad, there is the need of combined action in the areas of Government’s policy, legislative outreach and concrete enforcement measures to be taken on priority basis. The stress is on enforcement measures which, certainly, are the weakest link in the entire process. However, the Committee has not elaborated any of the three measures it has recommended. As far as we know, the Government is already seized of all the three components of controlling and reducing the quantum of unaccounted money.
The Committee has taken serious note of sudden surge in the number of cases with Rs 1 crore plus agricultural income. The irrational surge suggests adoption of unauthorized means of showing enhanced income through agricultural productivity. What the Committee has noted with concern is that the Government has treated this unusual spurt almost casually. The Committee believes that this is a matter of serious concern because if proper reckoning of increased income on account of agricultural activity beyond rupees one crore is not made, it could become institutionalized malpractice, which the Committee calls “domestic tax haven”. In our opinion this is a valid point. Unaccounted money can be shown as agricultural income beyond one crore of rupees and with that depositors find legal safety for non-payment of income tax. The Ministry has been advised to act forthwith on this issue and submit a report within one month about how the trend is being arrested.
Another important issue raised by the Committee is about the revenue foregone. It is strongly suggested that the quantum of the revenue foregone should be reduced in size at any cost. The panel wanted to know whether exemptions or incentives are in coherence with the overall intention or policy of the Government. The Committee is not against allowing incentives and inducements for growth of economic activity, as these are vital to strong economy but the Committee would like that the quantum of incentives should not be incoherent with the revenues. For example, the Committee found that foregoing revenue was to the tune of Rs 6.11 lakh crore, whereas Government’s gross tax collection in last fiscal is provisionally estimated at Rs 14.6 lakh crore. Noting that tax buoyancy for the fiscal year 2014-15 is 0.6 per cent for both direct and indirect taxes, the Committee does not find it would auger well for the tax capacity.
We think that the Ministry of Finance should take these observations in right earnest and concentrate on them. If the ministry finds the suggestions viable and yielding good results, there should be no hesitation or reluctance in accepting and implementing them.
Follow our WhatsApp channel