In a quietly subversive “revolt” 47 officers of the Indian Revenue Service, which administers taxes on income, hit the headlines this week with a policy paper “Fiscal Options and Response to Covid-18 Epidemic” FORCE outlining the tax measures government could take to deal with the economic downside of Covid-19.
Too young to be seen or heard
In any other setting, the publicly available recommendations of an informal group of young professionals would have been unexceptional but commendable. The government could have thanked the officers for their efforts and possibly even learnt from some of the recommendations.
Oddly, the governments reaction to this spontaneous and genuine burst of intellectual fervor was negative, even going to the extent of censuring the officers concerned for being out of line. Understanding the governments reactions is an entry point for understanding what ails governance in India.
The authors have less than 5 years of service and their two mentors less than 15. They are the “boots” on the ground for the Central Board of Direct Taxation, which is the apex body for administration of Income Tax – assessing and collecting income and corporation tax.
It is a long grind from where these officers are to the “policy making levels” in the Board – a wait of approximately ten more years. Young minds brimming with ideas need an outlet. Clearly the rigid structures within the CBDT do not permit such youthful exuberance.
The glory of public attention
At a more basic level the “selfie” world we live in sidelines all those who are not in the public space. It is common today for police officers, district officials and sundry secretaries to the government to post selfies of themselves doing what they are paid to do. Commendably the army has avoided such unnecessary self-aggrandizement.
In a world where the term “heroic” comes easily to everyone’s lips it is quite possible this group of young officers wanted to “post” their bid at being “heroic”. After all, assessing and collecting tax is a hum-drum activity. They have certainly attracted attention.
Caste is hardwired into the Indian institutional framework
The paper is said to represent the views of the entire Indian Revenue Service consisting of around 4200 officers. This is the elite cadre of the direct tax hierarchy – a caste within a caste – which gets a head start on appointment and retains this lead over junior tax services which remain laggards irrespective of subsequent performance.
Caste has been demolished by the Constitution of India. But it is alive and doing well within administration. The only difference is that we operate a hybrid model. The mode for entry into service is merit based. But thereafter an officer gets bound to her seniority and joins a slow-moving tread mill with institutionalized assured promotions every few years.
It is a model guaranteed to sap all youthful energy and “animal spirits” and convert curious young minds into globs of placidity and quietude – balefully chewing the cud. Many take to drink to bear the pressure of drab nothingness. Others adopt innovative ways to triple their wealth. The meek take to yoga, meditation, music, obsessing about their family or writing and churning out articles and books – anything to distract for their dull, predictable lives.
Not enough headroom to grow
Consider also, the ignominy of joining a service with a glass ceiling. The top job in the tax hierarchy is that of the Revenue Secretary who reports to the Finance Minister. This job is reserved for the Indian Administrative Service. It is “birth” in an institutionally superior service that sets the “twice born” from the IAS apart.
Deep freezing the prominence of the “British Collector” in India’s institutional space
The British did things differently in colonial India. By their book, the person who brought in the bacon ruled the roost. Land was the asset they taxed, and the Collector supreme in local administration.
Land revenue is an insignificant source of revenue today. But we are masters at deep freezing society. Those who become “Collectors” with 5 to 10 years’ service, go on to become Secretaries to the Government in states and in the Union Government. The “social distance” of the IAS from other services is institutionally hardwired at every level – an extraordinary aberration in modern administration.
It is from this perspective of permanent career discrimination that the revolt of the young IRS officers is to be viewed. Like the 1857 revolt, it is a cry for liberation from the shackles of second-class administrative status.
FORCE – too generous by half!
The paper itself is a refreshing read albeit a mite more “welfarist” in its approach than one would expect from crusty professional tax collectors whose primary duty is to grow tax revenue.
Six short term measures are suggested to enhance tax revenue. Of these the proposals to tax the wealthy at higher rate; the imposition of a wealth tax and an inheritance tax are all doomed from the start given that the wealthy are very mobile in seeking tax havens.
The merit of increasing tax exemptions for charity remain unclear given that much of such “giving” is emotive and reactive to present distress. Also, we should be careful that charity does not become a tax- exempt business.
The suggestion for settling the Rs 9 trillion of direct tax demand caught in litigation at various levels are welcome. But these need to be tested against corporate incentives for a quick fix.
The five medium term options are more innovative and yet also a bit fanciful. Imposing an alternative minimum tax on multi-national enterprises and e-commerce which function out of tax havens is one such. Unless implemented globally it could increase the cost of doing business in India to the detriment of Indian consumers. Increase in the equalization levy charged on foreign e-services needs to be reviewed for its business destruction potential.
Call for voluntary “giving up” of tax subsidies – will PM Modi bite?
“Give-it-up” is an interesting suggestion to facilitate a voluntary “giving up” of tax subsidy, deductions and other benefits for a specified time period. Prime Minister Modi’s charisma had made it a success in the case of cooking oil. He should do it again.
The paper also lists 47 suggestions to enhance taxpayer’s welfare. It is a mélange of relaxations of time limits for deposit of advance tax, submission of tax returns, increase in limits for tax deductible contribution to charity and a decrease in the amount for 20% to 10% before an appeal against a tax demand is admitted and demand stayed.
Two innovative suggestions stand out. The first is a “nihilistic” suggestion for a zero-scrutiny year. Fine tuning the scrutiny manual to ensure that scrutiny serves its purpose without being routine or intrusive might have been more useful.
WFH tax benefits
The other is a proposal to allow work-from-home-costs as corporate expense. This is good forward thinking and aligns well with the move in services away from expensive centralized workplaces to distributed work options.
More generally the paper would have done well to adopt a constrained optimization approach valuing the cost of relaxations and incentives against the gains from incremental revenue. But perhaps that would have been asking for too much given the obvious need to get the paper out quickly before the Covid-19 frenzy fades from notoriously transient public memory.
More such collaborative papers from young officers across the government spectrum could liven up the ideas pages of social media and possibly lead to some real results in policy shifts. Meanwhile may the FORCE be with young IRS officers.