India suffers from a non-tax compliant society: Arun Jaitley

Govt expenditure for poverty eradication, national security and economic development have to be compromised on account of non-tax compliance, Jaitley said. 

Published: 08th January 2017 09:02 PM  |   Last Updated: 08th January 2017 09:02 PM   |  A+A-

Arun Jaitley

Finance Minister Arun Jaitley (File | Reuters)

By Express News Service

NEW DELHI: Union Finance Minister Arun Jaitley, while reflecting on the two months gone by since the rollout of demonetisation, argued that India continues to suffer being a non-compliant society in terms of taxes, and said that expenditure for poverty eradication, national security and economic development have to be compromised on account of this reason. 

“For seven decades, the norm in India has been to perform transactions partly in cash and partly in cheques. Prime Minister Narendra Modi’s decision on demonetisation is intended to create a new norm.  It seeks to change the expenditure pattern of the citizens.  It is obviously disruptive.  All reforms are disruptive.  They change the retrograde status quo.  Demonetisation puts a premium on honesty and penalises dishonest conduct,” Jaitley noted in report released to the media on Sunday.

The Finance Minister dug out statistics to state that in 2015-16, around 3.7 crore assessees filed income tax returns out of which nearly 99 lakh people declared income below Rs 2.5 lakhs and paid no taxes even while around 1.95 crores declared income less than Rs 5 lakhs and 52 lakhs declared income between Rs 5 to 10 lakhs. He added that only 24 lakhs declared income above Rs 10 lakhs.

Claiming that no better evidence is required to substantiate that 'Pucca' and 'Kachha' accounts are a part of the business language, Jaitley argued that tax evasion has been considered neither unethical nor immoral.  “It was just a way of life.  Several governments allowed this normal to continue even though it compromised for larger public interest,” noted the Finance Minister.  

Jaitley further stated that currency is a “zero interest-anonymous bearer bond”.  “It has no name or history attached to it.  Crime can take place with or without cash, but excessive cash as a medium of exchange is favoured by the underground economy.  It results in non-compliance in the matters of tax payment which creates an unjust enrichment in favour of the evader as against the poor and the deprived. A  mountain of cash money reach tax havens through the hawala route from the original paper currency,” argued Jaitely, while adding that “cash facilitates real time untraceable payments”.

Indicating about remonetising the economy entirely, Jaitley also stated that reducing cash may not eliminate crime and terrorism, but can inflict a blow.  “States have shown that the stores of cash do not disappear on their own till governments take active steps to reduce the quantum of paper currency,” added the Finance Minister. 

Apparently seeking to portray a brighter picture, Jaitley reasoned that the size of the banking transactions and consequently the economy are bound to increase. “In the long run, the GDP will be bigger and cleaner.  Money entering into the banking system and officially transacted will give an ample scope for higher taxation – both direct and indirect,” added Jaitley.


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