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 V Shankar Aiyar |
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AU CONTRAIYAR Tax Less, Earn More Did you know that the collection of personal income tax has jumped nearly ten fold in a decade? Did you know that the Income Tax Department's collection has risen from Rs 1,250 crore in 1990-91 to Rs 10,132 crore in 1999-00 and is expected to touch Rs 11,816 crore in 2000-01? This rather revealing picture has been thrown up by the recently released RBI handbook on statistics (see chart).
The cassandras of doom who were criticising the move to slash personal income tax rates as a move against the poor and anti-socilaist may like to note that the rise in numbers has come in the wake of lowering of rates from the one time high of 52 per cent to 33 per cent (surcharges have been a recent aberration). What's more the jump in collection has been despite the general slowdown in the economy since 1996 and the consequent loss in job opportunities. Of course the upswing in personal income tax collection is not just the pay off from lowering of the rates (making it affordable and just for the tax payee) but also the result of the scientifically structured one-out-of-six scheme implemented by the Income Tax Department. As of today any person who has either a telephone/cellular phone, house/flat, credit card, club membership, has travelled abroad or has a car is liable to file returns. And the scheme which was operational in 54 cities till last year is now spread out to an additional 79 cities across the country -- in simpler terms every town with a population of 2 lakh and more now falls under the ambit of this move. And in just five years the number of assessees has double from just above 10 million in 1996 to over 22 million this year. Of course there is a gap here. The cities (with population of over 2 lakh) have been selected according to the 1991 Census. To start with one needs to question why the IT Department has been constrained by the MoF to stick with the 2 lakh people towns unless the Ministry has a study corelating taxability to the size of the town's population. Considering that Mumbai's population has nearly doubled in the last ten years from 8 million to 14 million, it is clear that several "worthy" towns and cities are still out of the loop. Obviously there is a need to push this scheme further. Therefore the government needs to do away with this fig leaf on the size of the population and simply apply the scheme across the country. It also needs to update its one out of six list to include other items. For instance, investors of mutual funds (whatever be the amount invested), owners of two-wheelers, owners of tractors and tillers, investors in National Savings Schemes, post office bachat yojana, internet subscribers and all applicants to public issues could all be brought under the ambit of the one-point programme of increasing compliance across the base of earners. My own sense is that not only the base of assessees would continue to double over the next five years as new elements and populations are brought in but the bring in higher amounts of moolah too. That, though, would by no means be enough. The government would also have to narrow path of incentivisation. As the number of tax payers rises and the kitty expands, the next few bugets must progressively bring down personal tax rates to more reasonable levels. Rather levels that are commensurate with the emerging/developing economy tag that India sports. As Chanakya says in his epic tome, tax collection must be a bit like bees gaining from the flowers. The bee cannot survive at the cost of the bloom.The idea is simply this: as the government brings in more people and mops larger amounts it must be seen to be rewarding those who come forth and pay up. (V Shankar
Aiyar is Associate Editor, INDIA TODAY. He is based in Mumbai. |
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