Why is the Fin-Min hiding taxpayer data from us?
Nov 14, 2013
By R Vaidyanathan
PROFESSOR OF FINANCEINDIAN INSTITUTE OF MANAGEMENT
Our Finance Minister told us in his last budget speech that there were only 42,800 people assessed to tax for incomes of more than Rs 1 crore. This is out of 3.1 crore assesses. There was a hue and cry and many observers commented about the need to increase tax coverage. However, what is equally interesting is the fact that the ministry actually ends up hiding this data from the public.
Till 2000, we used to get category-wise details from the All India Income Tax Statistics (AIITS). This publication has been discontinued. In other words, the finance ministry has become shy of providing details of tax assessed, etc. But let's see what the 2000 numbers tell us. (Click to see Table 1)
Apparently, in 2000 there were no salaried persons in the country with incomes of more than Rs 1 crore annually. In all, there were around 250 persons with salaries above Rs 25 lakh. In the case of the self-employed, the number was around 900, with none in the Rs 50-100 lakh category.
P Chidambaram. PTI
Does this mean there were so few film stars, cricketers, chartered accountants, company directors, or top managers - that is, salaried and non-salaried persons - in 2000 earning in the Rs 25-100 lakh range? These folks must have been in some financial distress, enough to float relief funds for them, given that they ought to have been among the richest Indians outside business owners even then.
In Table 2, we have provided the number of returns filed by some categories of services as published by the IT department in 1998. The numbers speak volumes about the coverage and also the nature of underlying collections. The whole country, it seems, had only 10,539 utensil shops and 5,477 furniture shops in taxable categories in 1998. These details are now being hidden for reasons unknown. Instead of details, what we get now is aggregated numbers, and that too is based on questions asked by some members of Parliament.
In Table 3, we have provided the information available from the IT department about assessees in different categories. It reveals that there were 3.1 crore assesses in 2010-11 and it does not tell us the amount of tax collected from different categories.
Another important aspect is the tax exemption on dividend incomes. There are owner shareholders who may be getting more than Rs 100 crore as dividends annually by virtue of their holdings. We do not know how much dividend was distributed and how much rich individuals benefited.
For instance, the Reserve Bank of India (RBI) says that 3,041 selected public limited companies paid out Rs 50,145 crore in dividends in 2010-11. In another 1,741 private limited companies, Rs 1,423 crore was paid as dividends. This implies that at least Rs 51,500 crore was not taxed by government at the 30 percent rate applicable to individuals in the top brackets - a saving of Rs 17,000 crore in taxes. Of course, financial wizards and accountants will argue that companies are paying dividend distribution tax, but this tax is levied at half the rate paid by the top bracket.
We need to know the details in order to understand who benefits most from having a dividend distribution tax instead of taxing dividends in the hands of individuals. We need to know the number of beneficiaries in various categories - from big shareholders to ordinary shareholders and salary-earners who may just own a few shares.
Such details are not published by the IT department anymore since it reveals the nature and extent of people covered by taxation. One strategy the government adapts to cover its inadequacies is to stop publishing details. This enables it to stop answering difficult questions. Hence we get a news item which tells us that "the recovery of tax arrears of about Rs 91,000 crore from stud farm owner Hassan Ali Khan is not possible". The finance ministry informed a parliamentary panel thus: "In Hassan Ali Group, the recovery is not possible though all known immovable and movable assets belonging to the group have been attached."
Is this any way to write off a sum equivalent to nearly 1 percent of GDP without adequate disclosure to the public at large?
The finance ministry should look at some of the websites of the income tax authorities in developed economies. They offer copious details and significant amount of insights.
Like the RBI, the income-tax department should bring out monthly bulletins as well as annual reports providing insights into the nature of our direct tax segments and the challenges faced. Otherwise it will only be perceived as a corrupt and non-transparent government department.
In the context of the computerisation of the IT department, there is all the more reason to revive the compilation of the All India Income Tax Statistics to make it bigger and larger in terms of information dissemination. An ostrich-like attitude is not of much use beyond confirming to the general public that the emperor has no clothes.