This government appeared to have aced propaganda, publicity and media management since 2014. But the way the Union Budget has been handled shows a complete breakdown of these very skills.
Forget about breakthrough ideas to unleash the ‘animal spirits’ of Indian business and accelerate economic growth, Budget 20-21 was a disaster even in terms of optics. It has created an unenviable record of being the longest Budget speech in 70 years (2 hours and 43 minutes), despite the last two pages being ‘considered read’ because the finance minister (FM) Nirmala Sitharaman felt unwell by the end of it.
Even as social media was quick to adjudge the speech as boring, a video of Union power minister RK Singh, apparently struggling to keep himself awake, while positioned just behind the FM, went viral, making matters worse. Mr Singh declared he was doing ‘eye exercises’ in parliament to ‘improve blood circulation’. But the damage was done. Take a look.
All this has to be seen in a context. Ms Sitharaman’s previous Budget was so poor that it embarrassingly got unravelled over the next three months, through a series of press conferences to announce rollbacks. This time, the ministry was supposed to be better prepared after a series of well-publicised pre-Budget meetings (albeit some with the prime minister (PM) at which the FM was not present).
But things are worse this time. The fusillade of rollbacks and clarifications began within hours of the speech and economic experts continue to pick apart the numbers of revenue and tax collections.
The BSE Sensex did a see-saw of 1,000 points after the Budget, especially when mutual funds turned big buyers on Tuesday. It is not clear if it is because they are expecting more roll-backs; but the gloom and bewilderment continues.
The government hates any criticism and PM Modi has already lashed out at critics saying, “attempts were being made to mislead people on the Union Budget,” but the post-Budget reactions from industry and commentators suggest that people are unwilling to be silenced anymore.
At a recent post-Budget meeting, realtor Niranjan Hiranandani minced no words when he attacked the “lack of total clarity, lack of demand, lack of liquidity and tax terrorism” that industry has to deal with. The rating agency CRISIL was equally blunt. “What makes this ‘shrinking’ feeling stranger and last longer is the long-overdue financial sector clean-up, at a time when the economy is suffering from other ailments,” said its review.
Investment adviser and writer Harsh Roongta was at his sarcastic best when he said, the FM deserves a ‘round of applause’ from the investment and tax advisory community, because almost every taxpayer will need their services. The HR (human relations) head of a large business conglomerate spoke about how they may have to set up help-lines to counsel employees on which tax regime would be in their interest.
This is the exact opposite of what Ms Sitharaman claimed in her Budget speech. It also shows a shocking lack of appreciation or understanding of people’s inability to deal with constantly changing rules and compliance requirements.
Even where the government was experimenting with a new tax structure leading to lower income-tax (I-T) for certain income segments, the FM caused needless confusion and anger by preferring hyperbole to straight talk and explanations. Ms Sitharaman prefaced her direct tax segment with a quote from Kalidasa’s Raghuvamsa: “Surya, the Sun, collects vapour from little drops of water. So does the King. They give back copiously. They collect only for people’s wellbeing.”
She went on to announce “a new and simplified personal income-tax regime wherein income-tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.”
The promise of “significant relief to the individual taxpayers” clearly implied that it would apply to all those who opt for it. But chartered accountants (CAs) totted up the numbers and quickly discovered that many would end up paying higher taxes.
At a post-Budget press conference, the finance secretary asserted:“I am not saying it (new scheme) will benefit everyone. It might benefit 30%-40%of the people. But, even if it is benefiting 30%, then also it is a big thing.” These, he said, are mainly senior citizens, new entrants to the job market and maybe some small businessmen and shopkeepers.
Wouldn’t it have made sense for the Budget speech to say that it is experimenting with a new tax regime that will offer the option of paying lower taxes to just two classes of taxpayers or about 30% of taxpayers? Why make tall claims and trigger outrage and negativity? Immediately after the Budget, the FM admitted to the ‘lack of clarity
’ and said, “(t)hat is why we have started issuing clarifications.” That is not what a Budget is supposed to do—create confusion, which needs to be managed.
Finance ministry mandarins also claim that 90% of the 580 million taxpayers had claimed deductions of less than Rs2 lakh in 2018-19. But, with so many people picking holes in the Budget numbers, we will wait to see if this is true.
Another botched up announcement related to taxing the overseas income of citizens who are not ordinarily resident in India. This triggered panic among non-resident Indians (NRIs) those who work in gulf countries that have no personal income-tax. Hasty clarifications have been issued after the issue was set to snowball.
Devil in the Detail
On many other fronts, the Budget seems to have worked overtime at making the lives of every segment of society difficult. High income earners as well as global Indians are outraged over the unfairness of dividend distribution tax to them as well as the change in ‘normally resident’ rules for NRI status.
FM says she has axed 70 out of over a 100 exemptions and I-T deductions and intends to review and rationalise many more in the coming years. One impact of this, and a series of new compliances, will crush charities and foundations engaged in not-for-profit public services. They will have to spend huge time and money on government compliances while tax exemptions on donations are badly squeezed.
In a country with no social security, a large chunk of people below the poverty line and a state incapable of delivering many public services, this attack on non-government organisations (NGOs) seems aimed at silencing and shutting them down en masse, rather than a selective clean-up. It is unclear how these seemingly vindictive provisions fit in with any of the three Budget themes touted by the FM: Aspirational India, ‘Sabka Saath, SabkaVikas, SabkaVishwas and Caring Society. Is it possible for the government to deliver on all of this through its own inefficient schemes and poor execution while cutting out help and support of private charities?
An Empty Charter
Even as it unleashed so much confusion over taxes, the Budget announced a ‘Taxpayer Charter’ to improve tax governance. It seems to be the brain-child of Sanjeev Sanyal, principal economic adviser in the finance ministry, who has been explaining it in a series of tweets.
Did he notice that we already have a toothless Citizens’ Charter announced by RBI governor Raghuram Rajan in August 2014, which was only a motherhood statement with no intention
of penalising banks for failure to abide by the Charter?
The central board of direct taxes (CBDT) has already posted a tax charter on its website with timelines for resolving issues; but no prizes for guessing that there are no punishments, or consequences, for failure to implement its provisions.
With stiff tax collection targets and policy-making in the hands of the tax department, it is no surprise that even Mohandas Pai, former CFO (chief financial officer) of Infosys and unabashed cheerleader of the government is sceptical. “Take away tax policy from CBDT,” he tweeted.
Mr Sanyal may have noticed that India also experimented with a tax ombudsman scheme but successive governments been extremely tardy about even appointing people to the posts. The Right to Information (RTI) Act also acted as a redress tool for a while, but that too is being defanged. This makes it difficult for us to get excited about a mere announcement of a Tax Charter, even if it is ‘enshrined in the statutes’ as the FM has promised.
We can dig up many such details and inconsistencies across various segments of the Budget speech—but what it adds up to is a government that is not in listening mode, out of touch with issues on the ground and far away from delivering either the caring or vikas that it has promised. Of course, it has been so for many decades now. And that makes this regime just as insensitive as the previous ones.