Why make paying tax more difficult?

The outburst of protests that greeted the notification of changes in income-tax forms, that were set to come into effect from the current financial year, must have hit both finance minister Arun Jaitley and Prime Minister Narendra Modi hard, and been particularly embarrassing as both of them were abroad and taking pains to assure both prospective investors and overseas Indians that they were trying to simplify the tax system.

Mr Jaitley was promising a Washington audience that taxpayers will now be seen as “partners, and not as potential hostages or victims”, and talking of a modern tax system that would be more people-friendly. Mr Modi had earlier accused the media of coining the phrase “tax terrorism”. One wonders if that description does not aptly fit the new ITR-1 and ITR-2 forms that were notified on Friday.

The ITR-2 form requires taxpayers to disclose full details of their foreign travel beginning 2014-15, the money that was spent, the source, the bank accounts they own, numbers, when they opened them and closed them, details, etc. This is puzzling as in most cases the I-T department already has most of this information. For instance, the I-T authorities already have information as the banks inform them immediately when TDS on interest income above Rs 10,000 in a financial year is deducted; also deposits above a certain amount are immediately communicated to the I-T department. What are the taxmen doing with all this information?

One can understand and sympathise with the authorities’ desire to find ways to tackle the menace of black money and benami accounts, but this kind of ham-handed approach cannot be justified. It would be interesting to know who had drafted the new forms, and whether the Central Board of Direct Taxes was aware of it? There is also a view in some quarters that such things might be done in order to embarrass the Prime Minister and the government.

It is a regrettable but well-known fact that India’s bureaucracy is the worst in Asia on inefficiency and corruption. Hong Kong-based Political and Economic Risk Consultancy Ltd ranks them 9.21 out of 10, worse than Vietnam (8.54), the Philippines (7.57) and China (7.11). Though this ranking dates from 2012, nothing much has changed since, despite PM Modi’s election promise to curb corruption. It is heartening, however, that the government acted with some promptness to contain the backlash, with revenue secretary Shaktikanta Das saying the finance minister had asked for a “reconsideration” of the controversial forms. We will now await a swift rollback.