Govt brushes off officers' proposal for wealth, coronavirus tax on super rich; terms IRS report 'irresponsible'
The suggestions are part of a paper titled 'Force', which stands for 'Fiscal Options & Response to the COVID-19 Epidemic', submitted by the Indian Revenue Service (IRS) Association to CBDT (Central Board of Direct Taxes) Chairman P C Mody,
A group of Indian Revenue Service officers have recommended taxing the super rich, and foreign companies, to help pay for the coronavirus economic fallout, but the government brushed off the idea, saying it did not reflect official views.
Some 50 officers of the Indian Revenue Service (IRS) recommended raising the highest tax rate to 40 percent for people with annual income above Rs 1 crore ($131,130) or a wealth tax for those with net worth of Rs 5 crore or more in a report sent to the Central Board of Direct Taxes (CBDT) and shared on Twitter on Saturday.
In a tweet late on Sunday the Income Tax Department, governed by the CBDT, said the report did not reflect the official views of the CBDT and the Finance Ministry. It said an inquiry was being launched into why the report was shared with the public.
IRS officers’ tax increase report irresponsible, say government sourceshttps://t.co/xjyZpiU79X
— CNBC-TV18 (@CNBCTV18Live) April 26, 2020
Finance Ministry sources said that neither IRS Association nor any group of officers mentioned in report were ever asked by the government to give any report on the subject. It was not part of their duty to prepare such a report and taking personal views to the media constituted an act of indiscipline, the sources said to Reuters.
The suggestions are part of a paper titled 'Force', which stands for 'Fiscal Options & Response to the COVID-19 Epidemic', submitted by the Indian Revenue Service (IRS) Association to CBDT (Central Board of Direct Taxes) Chairman P C Mody, a PTI report said.
According to the paper, dated 23 April, tax relief should be restricted to honest and compliant taxpayers, especially those filing returns on time as there have been many instances of non-filing of returns, increase in non-deductions and withholding of TDS apart from rising under-reporting of tax liabilities through bogus loss claims.
The central government has frozen the inflation-linked allowance for its employees and pensioners, a move that will help it save around Rs 37,000 crore.
Some of the short term measures suggested in the paper include a super-rich tax by raising the highest slab rate to 40 percent for those with an income above Rs 1 crore from 30 percent and re-introduction of wealth tax for those with over Rs 5 crore annual income.
Short term refers to a time period of 3-6 months.
As per the paper, a copy of which is with PTI, the surcharge introduced in the Budget 2021 on the super-rich may generate only Rs 2,700 crore to the exchequer and therefore the call to up the tax slab on the super-rich. Individuals having a taxable income of Rs 1 crore are considered as super-rich.
The paper has been prepared by a group of 50 IRS officers. The group has also suggested that the ultra-rich be taxed through two alternative ways which can be imposed for a limited time. One, up the highest slab rate to 40 per cent on income of over Rs 1 crore from 30 per cent now and two, re-introduce wealth tax for those with a net wealth of Rs 5 crore.
For the medium term, 9-12 months time period, the paper has suggested raising additional revenue from foreign companies operating in the country by hiking the surcharge on their income from the present 2 per cent for Rs 1-10 crore and at 5 per cent on incomes exceeding Rs 10 crore.
They have also called for imposing a COVID-19 cess to help mobilise additional revenue. The one-time 'COVID Relief Cess' of 4 per cent can help finance capital investment, as per the paper.
According to an initial assessment, such a cess can fetch Rs 15,000-18,000 crore for the exchequer, the paper said.
The report, dated 23 April, said that, “In times like these, the so called ‘super rich’ have a higher obligation towards ensuring the larger public good”. It also suggested a surcharge for foreign companies with a permanent establishment in India.
Economic activity has ground almost to a halt in India after Prime Minister Narendra Modi imposed a 40-day lockdown last month to curb the spread of the coronavirus.
That is expected to severely impact direct and indirect tax collections, which were already suffering from an economic slowdown before the pandemic.
--With inputs from agencies
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