Centre rejects tax hike proposal by IRS officials, calls it ill-conceived

Hindustan Times, New Delhi | ByRajeev Jayaswal and Anisha Dutta
Apr 26, 2020 10:47 PM IST

Some IRS officials had released recommendations to hike taxes along with other measures to shore up revenues to mitigate the economic impact of coronavirus.

The government has “summarily” rejected an “ill-conceived” report prepared by a group of Indian Revenue Service (IRS) officers that suggested raising income-tax rate up to 40%, imposing a super-rich tax and levy a 4% Covid-19 relief cess to rebuild the economy post-coronavirus pandemic, two finance ministry officials with direct knowledge of the matter said.

The finance ministry official said such a report on hiking taxes was never commissioned by the ministry.(PTI Photo/Representative)
The finance ministry official said such a report on hiking taxes was never commissioned by the ministry.(PTI Photo/Representative)

An ill-conceived report named as Fiscal Options & Response to Covid-19 Epidemic (FORCE) put up by a group of officers through IRS Association giving suggestions on increasing the taxes, etc., in the difficult time of Covid-19 pandemic and releasing the same in the media through IRS Association’s twitter and website is “an irresponsible act” of few officers, they said requesting anonymity.

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“A departmental enquiry will be initiated against people responsible for creating panic among the public by uploading this unauthorised report in social media that could have a serious consequence for both, the economy and the market. Thankfully, the market was closed,” one of the officials said.

Some of the key recommendations of the FORCE report are raising income-tax rate up to 40% for those with an income minimum Rs 1 core per annum, re-introduce wealth tax for those with a net wealth of Rs 5 crore and levy a one-time Covid Relief Cess of 4% on those with a taxable income of Rs 10 lakh and above.

“The proposals are against the government’s existing policy on taxation,” a second official said.

In the budget this year, the government gave option to individuals to opt for lower income-tax rates, provided they forgo exemptions. Earlier, it had reduced corporate tax rates drastically. In order to boost investments, the government in September gave a Rs 1.45 lakh crore bonanza to the industry by drastically reducing corporate tax rates. Accordingly, firms had option for a lower corporate tax rate of 22% (15% to newly incorporated companies) provided they forgo exemptions. Those interested in exemptions could pay the tax at 30% (25% for new firms).

While forwarding the FORCE report, the IRS Association on April 23 wrote to the chairman and members of the Central Board of Direct Taxes (CBDT) that it was prepared jointly by a group of 50 IRS officers. “Working from home, they have come together to leverage their combined knowledge, experiences, and commitment to building a healthy, strong and prosperous India,” the letter that was posted on its twitter handle late night on Saturday said.

“The report is only recommendatory in nature and it is not an official document,” one executive functionary of the association said Sunday requesting anonymity.

Later, on Sunday evening, the association tweeted, “The paper FORCE by 50 young IRS officers suggesting policy measures had been forwarded by IRSA to CBDT for consideration. It does not purport to represent the official views of the entire IRS, or the IT Dept.”

A CBDT spokesperson said the board always takes direct feedback from its field formations to improve its systems and processes, but it does not entertain any such unsolicited suggestions from the association.

“Neither the IRS Association nor any group of officers, mentioned in the said report, were ever asked by the government to give any report on the subject,” the first official said.

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It is prima-facie an act of indiscipline and violation of conduct rules which specifically prohibits officers to go to media with their personal views on official matters without taking prior sanction or the permission of the government, the official said.

“The Chairman, CBDT has been directed to seek explanation from these officers for writing such ‘ill-conceived views’ in public without having any authority to do so,” he added.

He said, “People should completely disregard such report. In fact, the Finance Ministry is doing its best to provide relief and liquidity into the system and ease the lives of people in these trying times.”

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