Shivaji Sarkar
There may be more politics than finance in the Finance Ministry proposal to increase the strength of income tax officers. Though the suggestion is to increase 200 officers as of now, the total strength may finally be raised by an additional 22,000 as per a proposal of the Central Board of Direct Taxes.
The UPA-II Government, which is going through a serious financial crisis, has come up with a bizarre reason for bolstering the strength of the income-tax department in an election year. It says that since the number of taxpayers has increased, they need more officers to scrutinize the tax returns.
While there is no denying that there has been some increase, it is not so phenomenal that its 47,000 officers cannot handle. Since 2006 the country has added only 30 lakh more income taxpayers in its kitty. In 2006-07, 3.19 crore paid I-T and on 2011 the number has merely touched 3.5 crore. Besides, the total number of PAN cards issued so far is 5.4 crore, but all are not taxpayers.
So what would these additional officers in the department do? A Government facing severe cash crunch should have considered how to reduce the number of personnel in the I-T department as its tax revenue is only rising marginally. It was Rs 1.7 lakh crore in 2011-12 and is estimated to rise to Rs 2.4 lakh crore in 2010-13 — an increase of about Rs 70 lakh crore.
However, the expenses on tax collection are increasing in a far higher proportion. While it was Rs 19,225 crore in 2011-12, in the next fiscal the estimated expenses are Rs 22,903 crore. This almost equals the expenses in social services (Rs 23,114 crore) i.e. education, health and broadcasting as well as economic services (Rs 24,334 crore) i.e. agriculture, industry, power, transport communications and science and technology.
Clearly, as the I-T department plans to add more hands, its expenses are likely to almost double even though the scope for tax collection shall not increase much. According to an assessment of the Comptroller and Auditor General, tax collection increases by about 2.4 per cent a year, which would be there even without the department. The latest practice of three banks ICICI, Yes bank and Axis has shown that the I-T department can investigate but cannot technically stop illegal transactions if conducted through legal channels.
So why is there a proposal to increase the number of I-T personnel? As such they don’t have much to scrutinize except some small discrepancies in over 98 per cent cases and the large ones in the remaining two per cent cases. While additional accrual of revenue has been minimal due to the department’s efforts, its expenditure on asset management has increased several times. The department has added many new properties all over the country and has many more vehicles. At the same time, many of its premises remain unoccupied.
If one trusts the CAG report, the tax collection at its given pace of 2.4 per cent would increase without much effort. The number of millionaires has increased from 88,000 in 2002-03 to approximately seven lakh now, of which over 50 per cent are in Government service. The sixth Pay Commission has turned almost 70 per cent of the Class I officers into millionaires. In other words, the taxes the Government is collecting are being handed over to its employees as salaries.
The scenario in corporate tax too follows a similar pattern. There are approximately less than 5 lakh corporate assessees up from 3.65 lakh in 2002-03. But a very large number do not have high income. In 2006-07, over 68,000 companies had reported income of over Rs 10 lakh. The number has marginally increased since. Besides, the number of companies with an income of Rs 50,000 to Rs 10 lakh is shrinking.
It is one of the toughest times India Inc has faced. With a slowdown in the economy, rising inflation and eroding profits, there is tremendous pressure on the companies across sectors. Of the top 10 corporate tax payers, barring Reliance and Tata group, all others, including ONGC, Indian Oil, SBI and LIC are from the public sector. Thus, taxes from them would pour in even otherwise and any addition to the department’s strength is not going to add any revenue. Instead it might erode the revenue earned.
Undoubtedly, this calls for better expenditure management in proportion to the revenue earned by the department. While funds spent in the social and economic sectors add to the GDP growth, expenditures by the tax department only drain Government resources.
Various arguments have been given by the department for “the need to increase the numbers”. Finance Minister P Chidambaram says it would better the tax to GDP ratio. In reality, it would just be the opposite. With additional 200 officers, each costing over Rs 12 lakh per annum in salary alone with another Rs 3 lakh-odd a year on other paraphernalia, the department would end up spending Rs 300 crore more!
There are other additional expenses on many non-productive activities as well. This may drain another Rs 500 to 1000 lakh more. If 22,000 more hands are included, the expenses would add up by Rs 3300 crore. Sadly, the tax bureaucracy is not really concerned about realisation of more taxes but its own welfare!
Remember, concerns have been raised by the I-T department about the narrowing down of their promotional avenues, unlike the IAS officers who get time-bound promotion. In the IAS, an officer can reach the level of a Joint Secretary in 16 years in States and 18 years at the Centre. But an I-T officer can hope to reach this grade only in 22 years. Likewise, an officer can become a Chief Commissioner, equivalent to the rank of an Additional Secretary, after 33 years in service, whereas an IAS officer reaches the same rank in 25 years and can become a Secretary in about 33 years.
The disparity in promotional avenues, income tax officers complain, starts at an early stage. While an IAS officer, who is selected from the same Civil Services examination, becomes a Deputy Secretary in eight years, an I-T officer would take 12 years. Therefore by creating the new posts, the Government hopes to brighten the promotional prospects of income tax officers considerably.
This apart there appears to be a hidden agenda. More the number of officials, as it did some 10 years back, larger would be the number of raids and scope for witch-hunting. Undeniably, it would help keep a check on political opponents in an election year. This apart, it is unhealthy to have too many officials in tax administration and policing. Countries in this bracket have seen more unrest, stunted growth and a rise in corruption.
Therefore, Parliament needs to both question and halt this unproductive expensive move that is likely to drain the exchequer. It also needs to cut the non-Plan expenditure of the income-tax department and force the Government to freeze number of their officers and employees. It can be rest assured of getting approval across the board. INFA
Follow our WhatsApp channel