Union Rejects IRS Officer’s Ill-Conceived Suggestions to Revive Economy

The Union Government has rejected the ill-conceived suggestions by a group of Indian Revenue Service (IRS) officers to increase the top income tax rate to 40%, impose a levy on the so-called super-rich tax and a 4% Covid-19 relief cess to rebuild the nation’s economy reeling under the coronavirus pandemic and subsequent lockdown.

Not properly convinced with the suggestion, the government termed these as very tough on people, who are already facing lots of stresses and troubles.

The suggestions were made in a report titled Fiscal Options & Response to Covid-19 Epidemic (FORCE) and released to the media on the IRS Association’s Twitter handle and website. The government deemed it an “irresponsible act” by a few officers, said two finance ministry officials with direct knowledge of the development.

“A departmental enquiry will be initiated against people responsible for creating panic among the public by uploading this unauthorised report on 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.

The two officials, who both requested anonymity, said the government had “summarily” dismissed the suggestions which it judged as ill-conceived.

Some of the key recommendations of the FORCE report were raising the income-tax rate up to 40% for those with income of Rs 1 core per year, reimposing a wealth tax on those with a net wealth of Rs 5 crore, deemed to be super-rich, and levy of 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,” another official said.

In the budget this year, the government offered individuals the option of paying lower income-tax rates provided they forgo tax exemptions. It had earlier reduced corporate tax rates drastically in September, sacrificing Rs 1.45 lakh crore in revenue. Companies were given the choice of opting for a lower corporate tax rate of 22% (15% for newly incorporated companies) provided they didn’t seek exemptions. Those seeking exemptions would pay income tax at the rate of 30% (25% for new entities).

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 had been prepared jointly by a group of 50 IRS officers.