Forget Anything ? Indian Finance Minister P Chidambaram After Presenting The Union Budget On Tuesday (Pic courtesy: Business Standard)
Within two weeks of skipping a credit card payment, I would get a call from the bank . "We are calling to remind you," they would say. This was more than seven years ago. Today, if I do a slightly large dollar purchase, real or online, I get a call within the hour asking whether i am aware of it.
The reason credit card companies and banks have been so up to date when it comes to payments and the like is technology. Fifteen years after liberalisation, the Government of India in general and the revenue authorities in specific are grappling with systems that put our otherwise claim of an IT Superpower to shame.
All the talent that goes into writing some of the most sophisticated banking technology software the world over is useless or not used when it comes to our country. The same technology that drives the credit card companies is not available with our revenue authorities. I strongly suspect out of choice.
Skimming Over Tax Collection
Finance minister P Chidambaram's Budget for 2006-07 once again skimmed over this most important but sorely neglected aspect of revenue collection. Nowhere did the Budget even mention how and where the effort to expand the tax base is. It did talk of computerisation - the target for fully computerised networks is end-2006. At a time when the second internet revolution is under way. Did someone say IT Superpower ?
The FM said the departments of income tax and customs and central excise will undergo Business Process Re-engineering. Its a somewhat mystifying term for a group of departments which are perhaps the most resistant to change in the country before or after the Bombay Municipal Corporation (BMC). He says nationwide networks will connect 745 income tax offices in 510 cities and 510 customs and central excise offices in 245 cities. He talks of national databases, national data centres, data warehousing faciltiies and so on.
None of this gives me a sense that the FM is any closer to ensuring that more people pay tax in this country. Like he or predecessors have not. This year's budget has been nice to individual tax payers like me as there are no additional taxes. That's because the Indian and global economies are booming. What if they slow down ? There are, depending on who you believe, something like 44 million individuals who file returns. Note that filing returns and paying taxes is not the same. The number that actually pay is a few million. And we are a nation of a billion plus.
Why Scrap 1/6 ?
The previous government introduced the 1/6 mechanism...ie..if you owned a credit card, car or travelled overseas, for instance, than you had to file returns. That has been taken away. Why ? Its almost like an admission that we have no more potential tax payers to catch. Or make existing tax payers pay more tax. Or have we found more exemplary methods to zero in on high spenders. Nothing that I have seen even remotely suggests the desire to do so.
The FM then said later that the process was falling in place. "As the department gets ready to mine the information, as the government captures more transaction.." This sounds like we have all the time in the world. And we are so rich that a few years here and there don't matter. Is it because the FM does not want to do something or is it the tax officials who are resisting tooth and nail. Remember the customs officials who splattered chewing gum on the closed circuit cameras at Mumbai airport because they did not want to be observed. Any ideas why ?
To sum up, not only is the government not using simple, existing technology to crack down on existing, non tax payers but telling the existing, paying ones that not paying pays ! So, while most of us pay taxes, a significant portion of potential tax payers in India continue to go scot free. And they can rest assured that the Government has no real intention of bringing them to book. If it really wanted to, it would have done what the credit card company did to me, within two weeks.