On Sunday, the Finance Ministry had junked an unsolicited report titled ‘Force 1.0’ (Fiscal Options & Response to Covid-19 Epidemic) drafted by 50 Internal Revenue Service (IRS) officers on the official Twitter handle of the IRS Association. The Chairperson of the Central Board of Direct Taxes (CBDT) has also been directed by the Ministry to seek an explanation from the officers about their misconduct.
(1/3)There is some report circulating on social media regarding suggestions by a few IRS officers on tackling Covid-19 situation.— Income Tax India (@IncomeTaxIndia) April 26, 2020
It is unequivocally stated that CBDT never asked IRS Association or these officers to prepare such a report.@nsitharamanoffc @Anurag_Office
An inquiry has been initiated into the matter to check whether the “ill-conceived views” aired by the officers violate Extant Conduct Rules. While reiterating that CBDT did not ask the IRS officers to prepare any such report, it further stated that the unauthorised views of the officers did not reflect the official stand of the Finance Ministry of the CBDT.
The Contentious Report
In the contentious report, the IRS officers suggested introducing the ‘wealth tax’, over-burdening the rich, and charging an additional 4% cess to bridge revenue deficit caused due to the Wuhan Coronavirus outbreak. As per the 43-page report, the Government can earn up to ₹18,000 crores by implementing the suggested proposals.
One of the recommendations of the report was the introduction of the wealth tax to be charged to those with a net worth of ₹5 crores or more. Besides, the IRS officers suggested levying a one-time 4% ‘COVID Relief Cess’ on individuals with more than ₹10 lac annual income. Moreover, the document also proposed taxing individuals with more than ₹1 crore annual income at 40%, which is 10% higher than the current 30%. As such, the income tax liability on such individuals will be close to 56%.
Along with the above measures, the IRS officers also recommended increased surcharges for foreign companies in India, creation of an amnesty scheme to collect unpaid tax, sanctioning of ‘Coronavirus Savings Certificates’ for investments not more than ₹2.5 lacs for 5 years, taxation of multinational firms making royalty payments to their parent companies and 3% equalisation charge to e-commerce companies.
Finance Ministry miffed over the report
The report drew the ire of the Ministry of Finance (MoF) for two primary reasons. First, the action of the IRS officers is in direct violation of the rules of conduct that prohibits them to air their personal views without the government’s permission. Second, the report has come to light at a time when the Central Government is trying to win over the trust of corporate houses and industrialists.
“Increased taxes or proposals are bad news to improve the confidence of the industrialists and corporates in the current situation. There is distress and the government is looking at incentivising businesses to restart the economy”, an MoF official was quoted as saying.
IRS distances itself
Soon after the so-called report received massive criticism on social media platforms, the IRS association distanced itself from the controversy. In a statement, the IRS association stated that the concerned paper prepared by young officers suggesting policy measures has been forwarded by the association for the consideration of the government. It does not represent the official view of the entire IRS or the I-T department.
Economic Measures announced in March
In a press conference held last month, Finance Minister Nirmala Sitharaman made key announcements amidst coronavirus crisis that has wrought havoc on the economic mood of the country. In a big relief to direct taxpayers, the Finance Minister extended the last date for filing personal income tax for FY 2018-2019 to June 30, 2020. Moreover, the interest rate levied on delayed payments have also been reduced to 9% from 12%.
The Central Government has also extended the deadline for filing Goods and Services Tax (GST) returns for March, April, and May 2020 to 30 June 2020. For companies with annual turnover less than ₹5 crores, no interest/late fee/penalty will be charged. For businesses with higher turnover than 5 crores, only the interest amount will be charged. Late fee and penalty have been waived.