Draconian laws

A new circular from the Central Board of Direct Taxes (CBDT) empowers income tax officials to attach your property if he/she thinks there could be a problem in getting tax due from you. This is one of the most draconian tax regulations to emerge in recent times, and opens a new vista for harassment and (inevitably) corruption.

While the taxman always had the power to attach property, as is argued by some protagonists of the circular, it is likely to lead to greater abuse now because the circular says that a tax official will be held responsible if a tax demand is not recovered due to his failure to follow the guidelines—which include prior attachment of property.

Every civil servant wants to protect his own back; so all tax men will now go by the new circular and play safe. Safety for the tax official means greater risk for the tax payer.

But what do we do, argue tax officials, when people don’t pay taxes, and litigation drags on for decades? The solution is to figure out ways to reduce litigation time, by setting up more benches of tax tribunals, appointing more judges, or whatever.

It is also worth keeping in mind that the bulk of all tax cases before various tribunals and courts are those filed by the government itself, as part of a general rule in the government that each case must be taken to the highest judicial level—so it is the government that is most responsible for the system getting sluggish.

Even if that were not the case, arbitrarily attaching people’s properties is not to be contemplated in a civilized society, especially when so many tax demands get struck down by the courts as unwarranted. Indeed, the hapless tax payer whose property gets attached is expected to deposit 50 per cent of its value prior to contesting a case.

The irony is that this is being done when income tax compliance has noticeably improved; so what is the problem that the government is trying to fix?

There is a pattern to government actions which shows growing recourse to such draconian measures. In the latest Budget, for instance, the finance ministry brought in a sweeping provision to act against chartered accountants for helping clients evade taxes—in this case, too, no great proof was required.

To quote the finance bill, “It shall be sufficient ... to allege a general intent to enable the second person to evade any tax .. without specifying any particular instance or sum of tax ... which has been or would have been evaded by such second person”! Fortunately, this provision was dropped following a public outcry.

Nor are such draconian provisions restricted to the finance ministry. In the Electricity Act, despite massive protests, the government has retained key provisions that allow power companies to play havoc with citizens.

Clause 135 (2) of the Act, for instance, allows the assessing officer to inspect, break open and search any premises in which he believes electricity has been or is being stolen. This is bad enough, but consider that part of the clause which says “likely to be used unauthorisedly”.

Once again, it is suspected intent. And while such raids can be made at 3 am (if there’s an adult male member on the premises!), the consumer has no recourse since another section of the same law gives all officers of the electricity company amnesty for acting “in good faith”. So, the electricity official can ask for a bribe, and if this is not paid, he can allege electricity theft, raid your premises at 3 am and then claim this was done “in good faith”!

We have heard promises from the government about getting rid of the “inspector raj”; it seems though that ord inary citizens ain’t seen nothing yet.