Monday 8 June 2015

Reforms in Finance Ministry

Why in news?
Two recent developments concerning finance ministry were in the news:

  1. Retrospective imposition of the minimum alternate tax (MAT) on foreign portfolio investors.
    • And that too by party in power that pledged to end the “tax terrorism” 
  2. A Circular issues by the Central Board of Direct Taxation (CBDT) telling its field officers to go beyond raids and searches to target tax evaders. The need of the hour is to instil the fear of “incarceration and consequent loss of liberty and social opprobrium”, it says.

Why do we need reforms?

Old mindset as exemplified by above two points.
SEBI, RBI - did reform in the past decades - but here, it's still pending.

Has there been any effort?

  • 2002 - during Jaswant Singh's regime:
    • Instead of raiding suspected tax evaders (just like any other civlised country) - develop actionable database - hence, Tax Information Network (TIN) was launched
    • Orders were issued not to harass taxpayers seeking refund and to refund it within the same fiscal (earlier practise was to issue it only when the current fiscal year ends)
  • Vijay Kelkar and Parthasarthy Shome (experts) - suggested reforms to modernise the Ministry
    • ensuring better delivery of services to India’s taxpayers
    • separating tax policy from administration and 
    • integrating the two boards that handle direct and indirect taxes:
      • Central Board of Direct Taxes (CBDT) and
      • Central Board of Excise and Customs (CBEC)
    • providing clarity and stability on tax policies.

So, even these haven't been implemented yet. 

What more can be reformed in the Ministry to make it more relevant with changing times?

  • wider public consultation
  • act as a source of innovative ideas, apart from what NITI Aayog is already doing
  • align itself to the larger goal of Public Service, providing best value to the citizens


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