Taxing The Taxpayers
Saral means simple, elementary and easy. It also the name of the so-called simple version of our Income Tax form. I write ‘so-called’ because it isn’t simple. Saral is a booklet consisting of 19 pages, of which 10 constitute the form, and nine are the instructions.
It is the most complicated ‘simple’ income tax form that I have seen. Only India’s Brahminical civil servants — the one’s who cut their teeth in the license raj and assume that everyone is a cheat and a ‘bounder’ unless proven otherwise — could have so comprehensively mocked the word ‘saral’.
Compare this mammoth form with the US Internal Revenue’s version of Saral, called 1040- EZ (pronounced easy). It consists of one page, accompanied by an extremely lucid, simply written set of instructions. I have filled the 1040-EZ on a couple of occasions. If there are no complicated heads of income and adjustments, filling a 1040-EZ literally takes no more than half an hour.
My gripe with our Saral tax form is not just that the thing is nine pages long. It has to do with the kind of questions it asks on pages 9-10, under “Schedule H: General Information”. It wants the particulars of every one of your bank accounts. So what, you may say. After all, the IT department needs the details of one of your accounts to send your income tax refunds. If that’s the reason, then the form should write, “Give the details of the bank account where your tax refund, if any, should be remitted.” But that’s not what it asks.
Saral also wants the details of all your credit cards. This begins to get my goat. Only 25 million of us pay income tax — a mere 2.5 per cent of the population. Rich farmers don’t; people pretending to be rich farmers don’t; most shop-keepers don’t; most traders don’t; those minting money through private tuition and personalised yoga classes don’t. They are never audited nor penalised for evading taxes. There’s no mechanism to check which credit card holders in India haven’t paid tax, and then to examine their finances. Who are the targets of such disclosure requirements? Not the tax evaders, but the tax payers.
In any civilised society, when you fill something akin to a Saral IT form, the assumption is that you are honest unless proven otherwise. So, well oiled systems like the IRS in the US design random audits on 1040-EZ returns, where less than 0.5% of the returns are picked up for scrutiny. The IRS doesn’t ask for your credit card details in its tax forms. You know why? Because if it did, every single US constitutional lawyer worth the name would take the IRS to courts. And they would win the cases on grounds of unwarranted invasion of privacy.
Saral then goes on ask about your cars (model, make, year of purchase and owner); all items of expenditure during the year in excess of Rs.50,000; and all details of foreign travel undertaken during the year (passport number, countries visited, duration of the ‘tour’, and expenditure incurred).
To my mind, the most obnoxious question is asking for the details of expenditure on the education of children: names of children, class and institution where they are studying, and expenditure incurred on each during the year (page 9). On what ground can a democratic state ask for such information in an income tax form? Why should a tax payer furnish this? Where my daughter or son studies is my family’s and my personal business. If the assumption is that I am an honest taxpayer unless proven otherwise, then why should government demand information about my children’s education? Clearly, the premise is just the reverse: every taxpayer is guilty unless explicitly proven innocent.
I am annoyed with this intrusion of the State at two levels. First, to any liberal, the act of generalised, undifferentiated, across-the-board intrusion of privacy is a sign of dictatorial preferences, instead of democratic ones. Think about it: that’s precisely what Saral is doing. It is asking every taxpayer who fills the form — honestly or otherwise — to part with information which nobody in her right mind would voluntarily give away. And it is being done because we as a people are incredibly tolerant about the intrusion of the State in our everyday lives. So, in response to the ‘one-in-six’ detection scheme announced by the Finance Minister, some dirigiste bureaucrats sat down and chose to insert all these question. That’s cause enough for anger.
Second, move away from ire and think of the absurdity of it all. We have a non-computerised income tax department which has successfully resisted all attempts at having anything to do with networked information technology. A department where IT files gather dust in musty rooms, and provide shelter to scurrying rats. Where it takes years of perseverance to get the cherished PAN number. Where, even after getting the PAN number, you may not get your PAN card. Where there is no scientific method of random audits. Where corruption rules.
The absurdity is that the State believes that this highly incentivised, super-efficient and technologically enabled revenue collecting machinery of India will do phenomenal sleuthing based on the data that we are forced to furnish on pages 9 and 10 of Saral. That bulbs will light up and, based on the discrepancies between the declared taxable income and expenditure, the IT officers will unerringly hone in on the under-reporters.
Who are we kidding? Shouldn’t the government first computerise the IT offices and use the PAN numbers that we give to car sellers, banks and credit card companies to create a data base? Why are we being asked to give up some of our liberty for an inefficient tax collecting machinery? What will they do with this information? In the interest of democracy, it’s time to know why.
Published: Business World, May 2002