FEBRUARY 05, 2020

By Vijay Kumar

Q. Do you think the taxes in this country are too high?

A.  Although the taxes look high, if you start taking all the deductions then they can actually come down to very low taxes.

Q. Are you saying that by getting rid of some of the deductions and concessions, you can then reduce taxes?

A.  We would like to clean it up. Don't have too many boxes, make the whole thing simpler so that people can do it themselves, instead of having to get chartered accountants. 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.

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.

See what Ms Nirmala Sitharaman said in her 2020 Budget speech

"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. It is almost impossible for a taxpayer to comply with the Income-tax law without taking help from professionals.".

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 jallikattu. 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.

Anyway, what did you expect? Did you believe that she would pull out a couple of rabbits out of her "bahi khata"? 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.

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.

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.

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.

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.

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.

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:

1. What they reveal is interesting but what they conceal is downright fascinating.

2. What they reveal is trivial, what they conceal is vital

3. What they reveal is suggestive, but what they conceal is vital.

4. What they hide is more important than what they reveal.

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.

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, "I will now take a short commercial break, but please don't go away; you may be taxed soon". Can government make some money by selling the rights for the FM's Budget telecast?

The prayer to the Finance Minister is TAKE ALL THE TAXES YOU WANT, BUT PLEASE DON'T MAKE LIFE MORE TAXING FOR US.

Budget 2020 - Write off Pakistan Dues - 300 Crores

I am never tired of repeating this.

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.

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.

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.

What is this amount of Rs. 300 Crores?

This is supposed to be  "Amount due from Pakistan on account of share of Pre-partition debt (Approx)".

This same amount had been shown consistently in all our budgets since 1950, including this year's.

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. 

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?

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.

GST - No gaming the system

The FM's speech contained some interesting observations about GST:

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 to game the system. 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.

Gaming the system 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.

Addressing taxmen in July 2019, Ms. Sitharaman said,

Those gaming the system 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.

Well, she means business, no games.

In her Budget speech, She quoted the chief architect of GST Arun Jaitley ji.

"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."

She also said,

Of the structural reforms, the Goods and Services Tax (GST) has been the most historic in our country.

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.

The dreaded Inspector-Raj has also vanished .

Has it?

In 2020-TIOL-155-HC-AHM-GST, the Gujarat High Court observed,

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.

No gaming the system by the officers too.

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.

Until next week