the essay of 5 February 2020 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">FEBRUARY 05, 2020</font></strong></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Burden of simplifying taxation</strong></font></p> <p align="center"> <u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar</strong></font></u></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Q. Do you think the taxes in this country are too high?</em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em> A. </em></strong><em> Although the taxes look high, if you start taking all the deductions then they can actually come down to very low taxes. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Q. Are you saying that by getting rid of some of the deductions and concessions, you can then reduce taxes?</em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em> A. </em></strong><em>We would like to clean it up. Don't have too many boxes, make the whole thing simpler </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span"><em>so that people can do it themselves, instead of having to get chartered accountants. </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>I don't think we can make it as simple as - I've earned so much, the deductions are so much, and here is my cheque. But we should move in that direction</em>.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You think that is Nirmala Sitharaman after her latest budget, No, that was Rajiv Gandhi talking to TN Ninan in 1985. Nothing much seems to have changed. We are still moving in the direction that Rajiv Gandhi thought we should.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See what Ms Nirmala Sitharaman said in her 2020 Budget speech</font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Currently the Income Tax Act is riddled with various exemptions and deductions which make compliance by the taxpayer and administration of the Income Tax Act by the tax authorities a burdensome process. </font></em><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span">It is almost impossible for a taxpayer to comply with the Income-tax law without taking help from professionals.".</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Madam Sitharaman has presented her second budget. The stock market greeted with a 1000-watt shock, only to realise later that bulls are still running a la <em>jallikattu. </em>As her party-men went gaga over the great budget, the opposition found nothing positive. This has been the exact position in all these seventy years. If you have to like the budget, you have to be in the ruling party.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, what did you expect? Did you believe that she would pull out a couple of rabbits out of her "<em>bahi khata</em>"? The poor lady had to read for nearly three hours. Really exhausting for her as well as the listeners. She has established a record for the longest-duration budget speech. Maybe we should have a law restricting budget speeches to a maximum of twenty minutes. The economy would look much brighter that way.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And why the budget on a Saturday? Saturday is a weekend holiday for the babus in Delhi and elsewhere. All of them had to come to office on this holiday because of the budget. It is usually a holiday for several others including Parliamentarians, journalists, stockbrokers etc., Just because 1st February fell on a Saturday, should we have the budget also on a Saturday? There is no much sanctity for the 1st of February as such. We could have had the budget happily fresh on a Monday. Or maybe a Friday, so that we have the whole weekend to comment on the budget.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We Indians are often accused of a lack of sense of humour. But twitterati proved that budget can produce the best humour ever. If you are not happy with your taxes, you can at least laugh. If the Nation's finances, notwithstanding a 'notional' nominal ten percent growth, terrifies you, just smile, things could be worse. And most probably will be.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If listening to the Budget speech of the Finance Minister was not a mandatory part of my efforts to make a living out of tax matters, I would happily sleep through budget speeches as Rahul Gandhi was alleged to have done inside Parliament some years ago. I have tremendous respect for our Parliamentarians who have to fight that yawn during the prolonged boring budget speeches, though some occasionally succumb to it. Yawning in Parliament may be bad manners, if not un-parliamentary (though snoring, perhaps is), we must admit that it is an honest opinion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this is said to be a global phenomenon. Vice President Biden is reported to have slept through President Obama's 2011 Budget speech. Door Darshan must have had a tough time focussing their cameras away from yawning and sleeping members. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After listening to so many budget speeches, I have not been able to understand why budget speeches can't be brief and just telling me how the Government plans to blow up my money and how the FM is going to tax me further. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, the wise men have decided that Budget speeches have to be long and boring and the really interesting part comes only towards the end and the vital parts are never revealed - they are hidden in the notifications. It is said that Budget speeches are like mini-skirts: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. What they reveal is interesting but what they conceal is downright fascinating. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. What they reveal is trivial, what they conceal is vital </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. What they reveal is suggestive, but what they conceal is vital. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. What they hide is more important than what they reveal.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And after the budget, all the wise economists of the country, cry their throats out hoarse on National, Regional and local TV channels analysing every aspect of the budget except the notifications and the Finance Bill which really matter. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the Budget serving only the media? May be the government can earn some pretty revenue by having some advertising slots for the budget. Even the FM can announce, <em>"I will now take a short commercial break, but please don't go away; you may be taxed soon"</em>. Can government make some money by selling the rights for the FM's Budget telecast? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The prayer to the Finance Minister is TAKE ALL THE TAXES YOU WANT, BUT PLEASE DON'T MAKE LIFE MORE TAXING FOR US. </font></p> <p align="justify"><font color="#993300" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Budget 2020 - Write off Pakistan Dues - 300 Crores </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I am never tired of repeating this. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is one item consistent and uniform in all Union Budgets from 1950. If you look at the STATEMENT OF LIABILITIES OF THE CENTRAL GOVERNMENT in the Receipts Budget of India, 2020-21, you will find certain interesting figures. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India's debt by the end of March 2020 would be around rupees 1,00,18,120 Crores which would be Rs. 1,09,50,019 crore by the end of March 2021. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Statement of the Liabilities of the central Government, the Total Liabilities are Rs. 1,09,50,319 Crores. From this an amount of Rs. 300 crore is deducted and the net liability is shown as Rs. 1,09,50,019 Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is this amount of Rs. 300 Crores? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is supposed to be <em>"Amount due from Pakistan on account of share of Pre-partition debt (Approx)". </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This same amount had been shown consistently in all our budgets since 1950, including this year's. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1950-51, when our total liability was Rs. 2865 Crores, this 300 Crores was deducted to arrive at Rs. 2565 Crores. Thus, the dues from Pakistan constituted slightly more than 10 percent of our debts. Ten percent of the present liabilities would amount to about 10.9 Lakh Crores, about half of this year's revenue receipts. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact is that we are not able to collect this amount from Pakistan for the last 70 years. Why should we keep showing it in the budget year after year? Is it to show our inability to collect from Pakistan or do we send a copy of our Budget to Pakistan to remind them gently that they owe us Rs. 300 Crores? Why can't we simply write off this 300 Crores and be done away with it instead of having this blot in all our annual budgets year after year? As a goodwill gesture, can't we tell Pakistan that their dues are written off? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is something that the Finance Minister can consider without sacrificing any pecuniary benefits and perhaps the Prime Minister can earn a few goodwill points. </font></p> <p align="justify"><font color="#993300" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST - No gaming the system</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM's speech contained some interesting observations about GST:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Deep data analytics and AI tools are being used for crackdown on GST input tax credit, refund, and other frauds and to identify all those who are trying </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span"><em>to game the system. </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Invoice and input tax credit matching is being done wherein returns having mismatch more than 10 percent or above a threshold are identified and pursued. Significant policy level changes have also been made. GST rate structure is also being deliberated so as to address issues like inverted duty structure.</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Gaming the system </em> in tax matters broadly refers to finding ways to take advantage of a system of laws for benefits, which were not intended by the lawmakers. Exploiting a loophole is one way of gaming the system. Loophole exploiting is perhaps legal, but system gaming could be illegal.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Addressing taxmen in July 2019, Ms. Sitharaman said,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Those </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span"><em>gaming the system </em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>are the ones you have to keep a watch on... data mining, big data usage are all instruments in your hand to understand where the wrongdoing is happening and I am with you if you are firm on those people. I am fully with you if you are really firm on gaming.</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, she means business, no games.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In her Budget speech, She quoted the <em>chief architect </em>of GST Arun Jaitley ji.</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"It will be an India where the Centre and States will work harmoniously towards the common goal of shared prosperity. The unanimity of the Constitutional amendment and the consensus of the GST Council highlights that India can rise above narrow politics for the nation's interest. With the GST, neither the state nor the Centre loses its sovereignty. In contrast, they will pool their sovereignty on decisions on indirect taxes."</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">She also said,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Of the structural reforms, the Goods and Services Tax (GST) has been the most historic in our country. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>True to this vision for the historic structural reform, the Goods and Services Tax has been gradually maturing into a tax that has integrated the country economically. It has consolidated numerous taxes and cesses to one tax and facilitated formalization of economy. It has resulted in the efficiency gains in logistic and transport sectors. The turnaround time for trucks has witnessed a substantial reduction to the tune of 20% due to abolition of check posts in GST.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The dreaded Inspector-Raj has also vanished </em>.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Has it?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU1OTU1" target="_blank">2020-TIOL-155-HC-AHM-GST</a></strong>, the Gujarat High Court observed,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>GST Acts are new enactments. Officers acting under the relevant provisions are required to study the scope of their powers under the statutory provisions under which they are acting and cannot act on the basis of presumptions or past precedents under a previous enactment. If the common man is supposed to know the law and face penalty for any infraction thereof, the officers enforcing such provisions are required to be well versed with the statutory provisions and the scope and limits of their power and cannot take shelter behind ignorance of law to justify their illegal actions</em>.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No gaming the system by the officers too.</font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Dunning-Kruger effect is a cognitive bias in which people assess their cognitive ability as greater than it is. It is related to the cognitive bias of illusory superiority and comes from the inability of people to recognize their lack of ability. Without the self-awareness of metacognition, people cannot objectively evaluate their competence or incompetence.</font></p> <p align="justify"><font color="#663366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until next week</strong></font></p> </body> </html>