Govt rejects IRS officers’ report suggesting 40% tax on super rich, calls it ‘irresponsible act’

Home / India News / Govt rejects IRS officers’ report suggesting 40% tax on super rich, calls it ‘irresponsible act’

The government on Sunday rejected an “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.

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,” a second 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.

“Working from home, they have come together to leverage their combined knowledge, experiences, and commitment to building a healthy, strong and prosperous India,” the letter that was posted on its Twitter late on Saturday said.

One executive functionary of the association, requesting anonymity, said on Sunday that the was “only recommendatory in nature.”

On Sunday evening, the association tweeted, “The paper FORCE by 50 young IRS officers suggesting policy measures had been forwarded by IRSA to CBDT for consideration. It does not purport to represent the official views of the entire IRS, or the IT Dept.”

A CBDT spokesperson said the board always sought direct feedback from its field formations to improve its systems and processes, but does not entertain unsolicited suggestions from the association.

“Neither the IRS Association nor any group of officers, mentioned in the said report, were ever asked by the government to give any report on the subject,” the first official said.

It is, on the face of it, an act of indiscipline and violation of conduct rules which specifically prohibit officers to go to media with their personal views on official matters without taking prior sanction or permission of the government, the official said.

“The Chairman, CBDT has been directed to seek explanation from these officers for writing such ‘ill-conceived views’ in public without having any authority to do so,” he said.

The official added:, “People should completely disregard such reports. In fact, the finance ministry is doing its best to provide relief and liquidity into the system and ease the lives of people in these trying times.”

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