As we battle our way
out of four lockdowns, we are grateful to the honest and courageous frontline
workers. We are pained by the affliction caused to those at the bottom of our
societal pyramid – the daily-wage earners and those moving back to their homes.
Each day we hear news that we don’t want to hear and also see news showing acts
of courage, selflessness and service.
In India we say that
one can tell how good the roads are when monsoon comes. We see how good our
financial, health and social infrastructure is when disaster strikes. This
disaster has shown that we still have a very long way to go.
The Atmanirbhar
Bharat announcements included some truly effective measures and some
half-hearted ones. There is no clarity about the quantum of the stimuli, the
cash outflow from government, the conditions imposed and the actual amount that
will reach the hands that will spend and translate into demand. One hopes the
next few rounds of ‘packages’ would cover what this one didn’t.
The easiest looking
part was hardest to understand – reduction of 25% in the TDS rate. We are told
this rate reduction will increase liquidity of Rs. 50,000 crores from 14th
May, 2020 to 31st March, 2021. Now if you had to be paid fees of Rs.
10 lakhs and Rs. 1 lakh is TDS, then instead of Rs. 1 lakh, the TDS deducted is
Rs. 75,000. But if you were making a loss in FYE 2021 – that Rs. 75,000 is
blocked and this 25% idea is useless! If you are profit-making you will have to
pay advance tax in that very quarter and shell out that 25%. One wonders what
is the liquidity infusion and for how long. Allowing loss-making entities to
claim refund of the TDS deducted, fast NIL deduction certificates, waiver of
first quarter advance tax and elimination of TDS entirely for six months
subject to review in December, 2020 would have brought cash in the hands when
businesses need them the most.
Many entities will
benefit from EPF paid by the government. In other cases, the employer and
employee contributions reduced from 12% to 10% for three months may not be
effective. The fundamental question is – When people don’t have money, where
is the question of compulsory saving for retirement? Salary payment without
deduction from the employee and postponement of employer’s contribution could
have brought money in the hands of both. Add to this a condition that such
scheme would be available if the employer didn’t retrench the employees for
6-12 months and after 3-6 months both employer and employee can decide to make
their respective contributions. This would have given job security and more
cash, both to the employer and the employee.
Most
government actions – even in times of need – seem half-hearted. I can only
think of two reasons for this: (1) They didn’t think about it, or (2) They did
think about it, but didn’t do it. Both situations are scary and mock taxpayer
and citizen groups. Simple and effective approaches are not difficult if
Neta-cracy and Babu-cracy are kept in check.
The Modi Government’s
performance in the field of finance has been discouraging, especially its
response. After the IL&FS and Punjab and Maharashtra Bank bust, the
Franklin Templeton case (six schemes worth more than Rs. 25,000 crores) and the
Yes Bank write-off tell a tale. In Yes Bank, the write-off of investment in
additional tier-one bonds (a quasi capital) under approval of the RBI
gave a wrong signal that investments in the capital of banks could fail. About
Rs. 8,415 crores of MF schemes and savings of tax-paid money are gone.
Today, both taxpayers
and beneficiaries of taxes are in the same boat. As a taxpayer – whether she
pays Rs. 1 lakh, Rs. 10 lakhs or Rs. 50 lakhs – she may not be able to get an
ambulance or a hospital bed in case Covid-19 strikes. I am not sure where the
taxpayer stands in the big picture! The taxpayer needs to rise and question
where her taxes are going and what does she get in return.
Raman
Jokhakar
Editor
