THE GIST of Editorial for UPSC Exams : 18 August 2020 (Make it less taxing (Indian Express))

Make it less taxing (Indian Express)

Mains Paper 3:Economy 
Prelims level: Tax to GDP ratio
Mains level: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Context:

• Last week, as Prime Minister Narendra Modi launched the “Transparent Taxation — Honouring the Honest” platform, aimed at easing the compliance burden and rewarding honest tax payers.
• Later, a tweet put out by MyGovIndia, a platform of the government, proposed an increase in the list of reportable financial transactions by individuals, apparently in a bid to widen the tax base. 

Bureaucratic overreach:

• In a country where only a minuscule portion(1.5Cr) of the population pays taxes, efforts to widen the tax base and curbleakages need to be encouraged. 
• However, widening the list of reportable transactions, which will dramatically increase the compliance burden of honest taxpayers, and create even more space for harassment by an overzealous tax administration, is not the way to do this. 
• While the tweet has since been removed, it may be indicative of the dissonanceacross various government departments on the approach to tax administration. 
• Proposals such as these reekof bureaucratic overreach, and would increase the degree of complexity of the tax regime, adding to both the time taken and cost of complying with it.

Increase in external and internal price:

• The proposal that was being contemplatedentailed covering financial transactions, including, among others, hotel payments over Rs 20,000, life insurance premium above Rs 50,000, and health insurance premium over Rs 20,000. 
• Such transactions are incurred by large sections of the salaried middle class — the honest taxpayers the government seeks to reward. 
• It is possible that the costs of complying with such proposals are distorting for salaried individuals while being progressive for non-salaried taxpayers. 
• But they would lead to an increase both in the internal and external price paid for compliance for all individuals. 
• Further, most high value transactions today require an individual to disclose her permanent account number (PAN), which is linked to the Aadhaar number. 
• Surely, in the age of big data, there are better ways of sourcing and cross-checking this data to check for evasion rather than putting the burden of compliance on taxpayers.
• The dissonance between the prime minister’s talk of a tax system that is “seamless, painless and faceless”, and such proposals is too obvious to ignore. 

Conclusion:

• Complex laws and procedures, compoundedby an inefficient and uncooperative tax department will further disincentivisecompliance. 
• Rather, the focus should be on building up the capabilities of the tax department to check tax evasion.
• Increasing burden of compliance on taxpayer is a bad idea. Better ways of checking tax evasionmust be found.

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Prelims Questions:

Q.1)With reference to the Quit India movement, consider the following statements:
1. On August 8, 1942, Mahatma Gandhi gave the clarion call of Do or Die to all Indians to drive away Britishers from the country. 
2. The movement had begun from Ramlila Maidan in Delhi. 
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: A

Mains Questions:
Q.1)What are the major objectives of the Transparent Taxation?