THE EXCHANGE. Swachh Bharat, in more ways than one

Leaders make decisions shaped by their own values. Some decisions can be small or affect a few people briefly; others can be extensive, triggering long-term community impact. Select initiatives can help determine the shape of the nation and the moralities of future generations.

Swachh Bharat is the mass movement for a clean and hygienic India. Inspired by the same ethos, I reflect here on promoting swachhta (cleanliness) in the economic sphere (through ethical dealings) with particular reference to standards of conduct in taxation.

The civil rights leader Martin Luther King had expressed (in a broad context) the need to link individual duties with the responsibilities of citizenship.

Many thinkers link social values to economic prosperity; they argue that practising principled public values is a moral imperative and in the national interest.

All this predictably implies that when people collectively insist that institutions act ethically, they must also strive to so act personally. While this sounds logical it requires much effort and resolve.

Let’s look around the globe to see if we are the only ones troubled by tax issues. A simple Google search can show that tax mitigation/evasion is a global passion, not just an Indian aberration.

At various points in the past few years, countries such as Canada, the US, Italy, South Africa, Australia, Thailand, some EU countries, Turkey, and the UK have resorted to voluntary disclosure-based tax amnesty in some form — some on time limited, some on an open-ended basis. So, quasi-amnesty is seen as an acceptable alternative globally.

Besides many global citizens regularising their affairs to avoid pursuit by tax authorities and the state, even at home an equitable reassessment of personal assets and income situations will go a long way in the quest for transparency, business ease and improved global standing for India.

In this context it is important that authorities follow the Prime Minister’s pointer that the efforts must result in bringing new taxpayers in the ecosystem. Salaried or fixed income persons are automatically in the tax net; the challenge is to garner business, trade and professional incomes and double the number of taxpayers.

I had earlier suggested that every Aadhar cardholder must be suo motu issued a PAN number. Whether he will thereafter be assessed to (and pay) tax will be a matter for the law to dictate.

In its hunt for black money (or unaccounted money kept outside the tax net) India is investing immense political capital and the Government demonstrates great conviction about mitigating (if not eliminating) its weightage in the economy.

I believe that every right-minded citizen, well-intentioned towards the nation, must support this larger initiative so that all persons deemed to be covered can be fairly assessed to tax, and the informal economy can be minimised, if not eliminated.

I also believe that everyone above a certain income — say, in the highest slab of ₹10 lakh and above — should be assessed to tax, irrespective of source.

Source-based and/or other exemptions, where necessary, must be in the lower slabs only.

A key aspect consistently articulated is that the current stress to encourage domestic disclosure/compliance has less to do with short-term revenue mobilisation and more to do with building a morally sustainable culture where everyone with non-exempt taxable earnings can pay his due share towards nation-building.

The leadership extensively elaborates that confidentiality and non-intrusiveness are hallmarks of the current initiative.

But, to my mind, there remain significant areas to be tackled if we wish that new taxpayers are brought in.

For one, a historically dysfunctional relationship between authorities and taxpayers (essentially mistrust, and a perception that once you are a taxpayer you can be questioned or harassed anytime) has built up over decades.

This cannot be wished away and is a serious mental deterrent to potential taxpayers. It is thus a moot question if caveats to authorities by the leadership are enough to overcome their ingrained instincts.

Budget after budget seems to increase both the onus on existing taxpayers as well as their divide with the rest of society (for example, by calling some super-rich, ultra-rich).

The tax authorities also do not appreciate distinctions between tax mitigation (which is lawful) and evasion (which is not).

We frequently hear about the real-estate sector as being high on black money usage; must we not revisit the entire chapter of taxes/duties which are probably the key reason for aberrations? Illicit monies are not an essential need for either buyer or seller.

In order to sustain hygiene once created, it is essential to eliminate systemic demands for illicit funds. While conspicuous consumption is being tackled, one cannot yet be certain that demands from the administrative ecosystem for routine gratuities and payoffs will disappear.

The Prime Minister is candid about linking electoral reforms and black money control. There are also signals that big-ticket black money use/generation have reduced generally. This is excellent.

Even though taxing the current valuation of undeclared assets can be morally justified, the practical aspects may act to dampen the inclination to disclose. I for one am also concerned that at the end of the current efforts on disclosure we do not revert to a situation (as after past initiatives) that only undeclared inventories come down but future generation or spending does not.

An era of SITs, judicial/civil activism, and data leakages lingers in people’s minds. Even if frequent statements are made about watertight compartments with no reference under other laws, given India’s extreme plethora of laws (some draconian), regulations and procedures, it is not an easily accepted proposition by most.

To overcome the resulting hesitations requires well publicised, watertight laws rather than FAQs (which do not have force of law). I cite Alistair MacLean’s book title, Fear is the Key , as germane to the current crusade; while this is necessary it does beg the question if fear alone is sufficient to inspire declaration from fence-sitters.

Leading writers contend that economic life relies on three interrelated ethical systems : outcome-based, duty/rule-based and virtue-based.

I believe that virtue-based swachh standards will be one real icon of our moral citizenship.

This column explores ideas and opinions on Indian enterprise and economy. The writer is an entrepreneur and former president of Ficci. The views are personal

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