Context: The Central Board of Direct Taxation (CBDT), a wing of the Ministry of Finance, has initiated disciplinary proceedings against some Indian Revenue Service (IRS) officers for a report they submitted to the government recently.
More on news:
- A group of 50 IRS officers to help the government in this hour of crisis, prepared a report titled ‘Fiscal Options and Response to Covid-19 Epidemic’, or FORCE, and submitted it to the government.
Key suggestion given in the report:
- In order to tide over the financial crisis, the report suggested raising the highest slab rate to 40% for income above ₹1 crore or re-introducing the wealth tax for those with wealth of ₹5 crore or more.
- Other suggestions:
- Providing an additional one-time cess of 4% on taxable income of ₹10 lakh and above for COVID-19 relief.
- Providing tax relief for sectors hit hard by COVID-19; and re-introducing the inheritance tax.
- Suggestions are not new: Inequality is on the rise everywhere. This is bound to be so, as Thomas Piketty showed, as long as r (rate of return on capital) is greater than g (rate of growth in the economy).
What brought the wrath of the government?
Generalist versus the specialist
- The Ministry of Finance is always headed by an Indian Administrative Service (IAS) officer. The Revenue Secretary, the Expenditure Secretary and the Finance Secretary are all drawn from the IAS despite the fact that they have little experience in handling the economy. Starting as local administrators they later hold top posts in the Ministry of Finance.
- On the other hand, the CBDT is managed by IRS officers with rich field experience. There were suggestions time and again that the Chairman of the CBDT should be of the rank of Secretary to the Government of India.
- At the time of the Budget, it is an IAS officer who accompanies the Finance Minister for the press briefing. The IRS officer is totally invisible, despite the Budget being the handiwork of hard-working IRS officers.
- Senior IRS officers know the intricacies of taxation, whether national or international. On the other hand, IAS officers know little about base erosion and profit sharing, transfer pricing, etc.
- Income tax law is a mess: In the past 60 years, the income tax law has never been mauled in a period of 12 months as it was in 2019-20.The Finance Minister called a press conference and announced radical changes in corporate taxation.
Occupying top posts
- It is mostly IAS officers who are made Governor of the Reserve Bank of India, Chief Election Commissioner, and Comptroller and Auditor General of India. IRS officers are rarely allowed to occupy top posts.
- And yet, a brilliant IRS officer became the Chairman of the Insurance Regulatory and Development Authority against all odds.
- The IAS may be the ‘steel frame of India’ but the steel frame has been rusting for quite some time.
The FORCE report is sound. The IRS officers who wrote it deserve admiration and not admonition.
Indian Revenue Services
- The Indian Revenue Service is the administrative revenue service of the Government of India. A Central Service.
- It functions under the Department of Revenue of the Ministry of Finance and is under the administrative direction of the Revenue Secretary and the ministerial command of the Minister of Finance.
- The IRS is primarily responsible for collecting and administering direct and indirect taxes accruing to the Government of India.
Image Source: Wikipedia