It is February again and everybody has started talking and thinking about the Union Budget. The Budget for the year 2012–13 and the Finance Bill presented along with it were controversial on account of the substantial retrospective amendments that were proposed. The debate regarding the desirability and its impact continues.
When Mr. Pranab Mukherjee took over as the Finance Minister, he lost no time in reversing some of the amendments made to the Income Tax Act during the tenure of Mr. P. C. Chidambaram. Mr. Mukherjee withdrew the controversial Fringe Benefit Tax, rolled back the time limits for completing the assessments and introduced Service Tax on legal services which Mr. Chidambaram had refrained from doing.
It is Mr. Chidambaram’s turn to undo what Mr. Mukherjee did before he was elevated to the Rashtrapati Bhavan. Soon after donning the cap of the Finance Minister, Mr. Chidambaram ordered a review of the GAAR and the retrospective amendments made to the Income Tax Act. It is also mentioned that he directed the tax officers to complete the time-barring assessments before December, 2012 although the statutory limit is March 2013.
In this background, one is curious as to what is in store in the ensuing Budget. Will the Finance Minister again bring back the Fringe Benefit Tax or introduce a new controversial tax? Will he withdraw the GAAR or defer it by a few more years? What will be the fate of the retrospective nature of the amendments that were introduced during Mr. Mukherjee’s tenure? Will Mr. Chidambaram continue the shadow boxing match with Mr. Mukherjee? The Finance Minister has been talking like a socialist; he mentioned about the desirability of introducing inheritance tax. (Remember, till 1985 we had the Estate Duty.) There is a flurry amongst the wealthy for arranging their affairs, to consult professionals for succession planning to minimise the impact of inheritance tax, just in case it is actually introduced in the forthcoming Budget.
The Finance Minister has hinted at increasing the tax burden on the so-called super rich. Will he do that? What will be the burden and who will be considered as super rich in the Indian context?
The Government has been talking about various reforms. But at the ground level, very little has been done. Except for formally permitting FDI in multi-brand retail, while leaving the final decision to the State Governments and a marginal increase in the diesel prices, there is hardly anything that one can talk about as reforms. The investment climate has not been very conducive and confidence of India Inc. and foreign investors is low.
The next General Elections are due in 15 months, in 2014. Depending on when the elections are held, this may turn out to be the last full-fledged Budget of the present Government. So, there will always be a temptation to present a populist budget.
Mr. Chidambaram, intelligent and unpredictable that he is, has kept everybody guessing. Recently, while addressing foreign investors in London and elsewhere, he stated, `the Budget that will be presented in February will be a responsible Budget’. One doesn’t know what he means by a responsible Budget. Did he mean that the earlier Budgets presented by his predecessor were irresponsible? Everybody is keeping their fingers crossed and waiting!!
In this issue, we bring you an article relating to corruption by Mr. Hardayal Singh, former Income Tax Ombudsman. We always talk about the gap between what the society expects from auditors and what auditors can deliver. There is a similar expectation gap between the system combating corruption and what the society expects. The author mentions that the story he is narrating has an important lesson for those who expect instant solutions. When one reads the article, one is left wondering whether the system really delivered if an honest officer had to go through the prosecution, conviction and sentencing by a lower court before being acquitted by the High Court. Or whether the officer indeed acted under pressure of a politician and was guilty, at least, to that extent.
While rules and systems are extremely important, they should prevent corruption; yet not be such that they stifle the decision making process itself. In appropriate cases, the officer must be able to exercise and should have the courage to exercise discretion and take decisions. Today, honest officers avoid taking decisions out of fear that they will be implicated for the decision that they took. Is it a solace to the officer that ultimately some higher court will acquit him?
Nonetheless, the article brings to us a point of view which we need to think about.
