When the tax bosses got uptight

Subir Roy

There is an element of the absurd in the central board of direct taxes issuing charge sheets to three senior Indian Revenue Service officials with around three decades of experience. Their transgression is the role they played in a report prepared by 50 junior officers of the department getting into the public domain. What makes things more serious is the three officials, two of whom are office bearers of  the IRS Association, being relieved of their current responsibilities.

The report entitled FORCE, acronym standing for ‘Fiscal Options & Response to the Covid19 Epidemic’ (the present dispensation loves acronyms), suggests hiking taxes to raise additional revenue needed by the government at the present juncture when social obligations have multiplied because of the fallout of the coronavirus pandemic.

The specific proposals are to raise the income tax rate to 40 per cent for those earning over Rs one crore in a year, reintroducing wealth tax for those with net wealth of over Rs five crore, a one time 4 per cent COVID-19 relief cess on taxable income of over Rs 10 lakh and, very interestingly, a three year tax holiday for all businesses in the healthcare sector. The report estimated that the one time cess could mobilize over Rs 15,000 crore which could be spent on capital expenditure for relief works.

What has got the government’s goat is that the report, instead of only being forwarded through official channels to superiors (then it would have likely got hardly any attention), was also sent to the officers’ association which made it public through social media. This naturally got widely circulated, created a commotion in the minds of the better heeled and forced the government to issue a denial in order to kill the idea.

The three senior officials’ particular transgression is that they were the force behind this ill-conceived idea and misguided the youngsters. This when they have three decades of experience and would know how to go about such an exercise.

It is difficult to believe that the senior officials did not know the consequences of a controversial idea seriously thought out getting leaked to the public domain. They also will be knowing that they have not in any way breached the official secrets act as the matter in question is not something concrete in government files but just an idea. At best it can be considered a discussion paper issued to elicit public response.

The report prepared by juniors can be likened to an assignment being given to trainees asking them to put down on paper what they would do in a situation like this. Their output would indicate how aware they are of the weapons available in the government’s armory if it were to choose to quickly raise substantial revenue to face an unexpected crisis.

It is not clear why a proposal, prepared by 50 junior officers put in the public domain, can be treated as anything more than an airing of thoughts. The reason behind forwarding it to the superiors can be to tell them: see how bright today’s youngsters are.

The episode reveals two clear positives among the realities prevailing within the tax administration. People both at the middle and the bottom have not lost the ability to think a little bit out of the box. There is also a sense of openness, of being willing to discuss publicly what affects the public deeply. If anything, the government’s reaction shows that things at the top remain classically bureaucratic. People get uptight when there is a deviation from the rules.

It is also possible that the senior officials charged have a sense of humor. One fine morning when they had the report in their hands they could have thought it was a good idea to play a cat among the pigeons. A group of patriotic youngsters have suggested something which will upset the well-heeled. So let’s forward it and also make it public, thus getting the top to come out on where they stand on the question of taxing the rich during a time of a national emergency.

It may also be that the seniors have acted a bit irresponsibly. They did not think out the full consequences of what they were doing. Now that it has created a stir maybe they are wondering if they should not have been more rule bound. For this they can be reprimanded. But to ask them to show cause and relieving them of their responsibilities seems to be going way overboard.

There is also some speculation that the whole idea was a trial balloon which went a bit awry. But this seems unlikely as then the senior officials would not be taken to task for doing what they were unofficially prompted to do.

Subir Roy is a senior journalist and author. Views are personal.