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With the pandemic completely upsetting the fiscal balance, a group of taxmen has suggested hiking the tax on the super rich; introducing a Covid cess and Covid Saving Certificates; raising an equalisation levy; and initiating a ‘Give It Up’-type campaign for tax concession, among measures to mobilise resources.
This is in response to the purported feedback sought by the Central Board of Direct Taxes (CBDT) — the apex policy making body for income tax — from officers.
The report on policies and suggestions for meeting the challenges in reviving the economy titled FORCE (Fiscal Options & Response to Covid-19 Epidemic) prepared by a group of 50 Indian Revenue Service (IRS) officers of the Income Tax Department has been reportedly submitted to the Finance Minister and the Board, besides others.
However, the CBDT, later in the day, denied that it had ever sought a report from the IRS Association or any other officers, and said it would order an inquiry into the issue.
Two categories
The suggestions offered by the officers to mobilise revenues have been divided into two categories —– short term (three to six months) and medium term (nine-12 months). Under the short-term ‘Taxing the Wealthy’ category, suggestions have been made to raise the highest tax slab to 40 per cent for people earning ₹1 crore or more in a year or re-introducing wealth tax for those with net wealth of ₹5 crore or more. Another proposal has been to increase the surcharge applicable to foreign companies with higher income having a branch office/permanent establishment in India. For effective utilisation of the resources raised through either of these suggestions, it has been proposed to keep the additional amount in a separate kitty — similar to an escrow account. The government can then identify five to 10 crucial projects/schemes entailing significant expenditure, which are likely to have a decisive impact on reviving the economy.
‘Covid relief’ cess
Another proposal by the I-T officers pertains to imposing a one-time ‘Covid relief’ cess of 4 per cent. The extra revenue mobilised on this account could be between ₹15,000 crore and ₹18,000 crore. To mitigate the extra hardship on the middle class, the cess could be made applicable only in cases where the taxable income is greater than ₹10 lakh. It has also been suggested to bring a new scheme, Covid Saving Certificates (like NSC), to allow tax saving over and above the existing limits.
With respect to suggestions for the medium term, one of the proposals to expand the business of e-commerce/online streaming/web services companies provides an opportunity to increase the equalisation levy rates by 1 per cent — from 6 per cent to 7 per cent for ad services provided by online streaming/web services and from 2 per cent to 3 per cent for e-commerce.
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