The government needs to change its processes and procedures, says DS Saxena, former principal chief commissioner of income tax, Mumbai
Do you think demonetization will help weed out black money?
It is too early to say. Only when the final results are in by December 31, we will know if black money has been weeded out or not. Besides the figures too are in dispute, I think. Earlier RBI had said that Rs 11.55 lakh crore of demonetized notes had come in. This has been disputed by SBI. Since the results are not yet out and the available data is also not complete, the scheme cannot be judged as on today.
We have to strike at the root of the problem, which is generation of black money. This is a one-time measure. We have to focus on measures so that black money generation is stopped or at least reduced. I do not think it can be completely stopped and loop holes will still remain.
Due to suffering caused to common man, the scheme has attracted a lot of criticism. Your views?
Probably they could have come out with new notes which were the size of old notes or six months back, printed enough Rs 100 denomination notes. Then this problem would not have arisen and everyone would have had sufficient Rs 100 notes. Long queues are everywhere. Deaths (of people) waiting in queues are the social costs of demonetization. All this would have been avoided if the consequences had been thought earlier and implementation had been better.
What measures are required to curb black money?
The government needs to actually change its processes and procedures which I see as the main impediments. There are many people in the government who know the loopholes in processes and procedures and delay things. As a result people get fed up and pay money to get work done. That is how black money is being generated.
What about corruption?
If you look at corruption, it is spread all over.
There is a view that instead of note ban, the source of election funds and undeclared money parked offshore should have been unearthed first.
That is a perception. We have to fight on many fronts and this one of them. Unless you address the root cause, the stash of black money will come up again after some time. Processes and procedures of government should be simplified and made better. Tax laws needs to be relooked at and made transparent.
Do you think writing off debts of big ticket defaulters will help?
This needs to be looked at on a case to case basis. If you look at Vijay Mallya’s case, it should have been handled in a better way. If there are 100-200 big defaulters, their cases should be dissected and analysed to check if recoveries are possible and if there was malafide (intention). Genuine businesses also can fail and can generate bad debts and such cases have to be treated separately from those who have defrauded the government.
What are the ramifications of writing off bad debts of big ticket defaulters?
It sends a very wrong signal when banks are chasing recoveries from those with loans of Rs 1 lakh, Rs 2lakh or Rs 5 lakh. On the other hand, those who have defaulted in thousands of crores are roaming around and have money at their disposal. This sends a very wrong signal.
It is a common view that Income tax department needs overhauling.
The problem that I personally see is of infrastructure because we are short of manpower and physical resources and the task given to the department is enormous.
Since people fear harassment from IT department, it is being said that a lot of black money will go undisclosed.
There is an in built fear from all government departments and people do not want to interact with the government. We need to step up our credibility so people are not afraid to approach any government department and only then this kind of trust deficit will be (bridged).
There are reports that Income Tax may be done away with and Banking Transaction Tax brought in.
I have my reservations on this. All advanced countries in the world have Income Tax. Second, revenue that comes from Income Tax is well defined. If the IT tax collection is Rs 8 lakh crore and falls to Rs7.5 lakh crore, (how) will the government (cover) that deficit? People who are dealing with cash are not taxed. This would run counter to what the government is now trying to do. In such a scenario, BTT will not succeed.
What changes are required in Income Tax Act?
Our IT Act dates back to 196I and even before that we had income tax. I do not think many changes are required. It has functioned well so far. We have to remove misgivings from the minds of people that the department will harass them. Now income tax returns and refunds have become online and refunds come back within 1 or 2 months. The tax department is a welcoming place now and with efforts being made, slowly and gradually people will have enough trust in the IT department.