Laws are meant to serve a number of
purposes: Establishing standards, maintaining order, resolving disputes, and
protecting liberties and rights, etc. Indian laws often fail to achieve these
purposes and even produce opposite outcomes! Often Rule of Law does not bring
intended results when laws are not equally applicable (say between State and
citizens or amongst groups of people), not equally enforced, not adjudicated
fairly and lacks a timely and cost-effective justice delivery system. In the
Indian context people avoid or dodge laws due to many reasons such as:
a.Following rules does not necessarily lead to
intended / expected outcomes (low standard of service to a tax-payer or bad
quality of service delivery from State or administrative underperformance).
b.Laws are larger than the purpose they serve
(disproportionate compliance, corruption, red tape, treating the tax-payer as
evader, arbitrariness, lack of accountability).
c.Justice delivery and adjudication process is
so convoluted and takes so much longer than it should even for routine matters.
The above can only be remedied by government
empathy and innovation so that citizens are encouraged to abide by the spirit
of the law and don’t get worn out by burden of doing business which is more
akin to doing compliances. It is said: Tax evasion is reprehensible; it is
social injustice by the evader to his fellow citizens. Arbitrary or excessive
taxation is equally reprehensible; it is social injustice by the government to
the people. In today’s context excessive, reactive, and irrelevant laws
constitute reprehensible acts of social injustice by government on its own
people. Constant tweaking, amending, notifying, not notifying for months and
years1, changing schema, dysfunctional compliance portals (take GST
and PT) and the list is unending.
1 In 643 days of GST (known as Good and Simple
Tax) at the beginning of April 2019: 1 Amendment Act, 31 amendments in CGST
Rules, 364 Notifications, 224 Circulars and Orders. That is 620 changes in CGST
and IGST alone or nearly 1 per day and SGST changes are disregarded.
Let’s take the example of Digital Signatures
Certificates (DSC) in case of non-resident directors. They require Apostille /
Notary every two years. Add KYC process by MCA to this (aka duplication). Such
authentication costs Rs. 8,000 to 14,000 per document in many countries. While
authentication is a valid aim, its feasibility (cost, benefit, time, risk) in a
given context (say a non-operational or non-public interest entity) requires
balance. On top of this, banks ask for their own KYC. That is not all. New
changes require a video of the person (perhaps to check he is alive) before he
can get a DSC! Additionally, MCA has brought out new forms that necessitate
giving a photograph of the Director and latitude and longitude to keep the
company ‘active’! Moreover, the requirement for a full-time company secretary
is a cost burden due to a threshold / basis that is not reflective of the
actual need for having one. In a connected world, numerous disconnected laws
translate into a barrage of futile compliances that give a false sense of
conformity especially for mid-sized businesses.
Take obsolete laws! Inter-state change of registered
office requires that creditors give NOC. In a recent case, creditors gave their
no objection on email through scanned letters. After uploading them, the MCA
asked for proof of calling for the confirmations. Well, there was no choice but
to post those letters to creditors, enrich the postal department and upload
proof of sending by ‘Registered AD’. And yes that ‘compliance’ met the legal
requirements and the registered office shifting got approved.
Every form and procedure necessitates
periodic evaluation by an independent questioning group and a survey from users
– to ensure that these forms and procedures remain effective, smooth, and
meaningful. This is especially necessary for a compliance averse society like
ours. New compliances coming out every few months seem like surgical strike –
but on the wrong side – numbing the already low and overburdened base.