2 MAY 2016
Where are India’s taxpayers?
Only 2.9 crore Indians filed personal income tax returns for the assessment year 2012-13 — that is less than 4 per cent of the 760 million adults enumerated in the 2011 Census. More than half these 2.9 crore individuals paid no tax at all. That the country’s direct tax base is dizzyingly narrow is an often stated problem. But data put out on Friday by the Income Tax Department provide details to frame the challenge yet more sharply. This includes time series data from 2001-10 to 2014-15; of particular value are the income tax return statistics that the department has posted on its website. For now only the details of the assessment year 2012-13 are available. This is a long overdue first step in encouraging, as the department has stated, “wider use and analysis of income tax data by departmental personnel as well as various stakeholders including economists, scholars, students, researchers and academicians for purposes of tax policy formulation and revenue forecasting”. The data will be duly mined, but in broad brushes they paint a disturbing profile of India’s political economy. Due to the failure in bringing enough well-off Indians into the direct tax net, the country has been mobilising revenue through indirect tax collection. In 2015-16, direct taxes contributed only 51 per cent of the tax revenue, lower than in recent years (and even the government’s expectations) and the lowest since 2007-08. An increasing share of indirect taxes in total revenue collection is cause for alarm because indirect taxes affect all Indians alike, rich and poor. Indeed, given that the poor generally spend a greater fraction of their income on essentials than the rich do, with wider indirect taxation, they end up paying a higher individual tax rate than people considerably wealthier. For a start, therefore, the time series data should nudge policymakers to reframe tax governance priorities and rejig the direct-indirect tax ratio more equitably and progressively.
It is not just that indirect taxation needs to be rationalised. It is clear from the income tax return statistics that direct taxes continue to be evaded in substantial measure. Consider, for example, that just 18,358 individuals declared incomes of over Rs.1 crore in 2012-13, and that 1.5 per cent of taxpayers accounted for over half the personal taxes due. These numbers do not square up with sales of luxury cars, high-end accessories, gold and real estate. As stressed in the Centre’s Economic Survey this year, taxation is a core element of modern citizenship in democracies. India may have chosen taxation as citizens’ central obligation, but its direct tax revenue base is too narrow — an uncomfortable position for an economy steadfastly trying to scale up social and infrastructure investments while maintaining a semblance of fiscal discipline. The government needs to push through meaningful reform like taxing large farm incomes and rationalising bounties enjoyed by the well-off, to widen the base. Most importantly, however, it needs to match the databases already available to prevent tax evasion, something that only needs political will.
Self-reliance is the key
The Indian Regional Navigation Satellite System constellation is now complete, with the Indian Space Research Organisation successfully launching the seventh and final navigation satellite, IRNSS-1G. The first of the seven satellites was launched in July 2013. With this seventh launch, India has an independent regional navigation satellite capability that covers the entire country and an area extending about 1,500 sq. km beyond its border, with a position accuracy better than 20m in all weather conditions. The system will be operational in three to six months, once the satellites are stabilised as a constellation and initial tests are completed. Currently, the IRNSS does not have backup satellites in orbit that can be put to use in case of a glitch in any of the satellites. Two spare satellites are available for launch in case of an emergency. The navigation system will provide both Standard Positioning Services for civilian use and Restricted Services for military use. A navigation system can be achieved using a certain number of satellites for specific constellations. ISRO opted for seven satellites — three in geostationary and four (as two pairs) in geosynchronous orbits — to provide the best navigation services. The United States’s Global Positioning System has a constellation of at least 24 operational satellites and a network of ground stations across the world to provide coverage globally.
The U.S.’s GPS navigation system, which became operational in 1993, offers good coverage and service globally; other countries and regions already have or are building their own systems. Russia’s Global Navigation Satellite System too is global in coverage. In 2012, China got its BeiDou Navigation Satellite System operational, but unlike the GPS and Russia’s GLONASS, it is currently more regional in coverage; it intends to expand the system for global coverage by 2020. The European Satellite Navigation System, Galileo, with global coverage, will be operational only by 2019-2020. Japan too is establishing its own global system. With satellite positioning becoming the standard way of navigating and many civilian utilities reliant on it, the implications of signal failure, whether deliberate or accidental, will be enormous. More importantly, the availability of reliable, encrypted, accurate positioning and navigation information from IRNSS will mean that Indian military operations will not have to rely on GPS data. During normal times, the interoperability (where an instrument can receive signals from multiple systems of satellites) of IRNSS, GPS and GLONASS will mean that civilian users will have additional sources of data, especially in urban areas and mountainous regions. This will allow them greater accuracy in timing or position measurement. More services have come to rely on positioning and navigation information. As the IRNSS constellation becomes operational, the focus should shift to making sure that industry rises to the occasion to manufacture receivers. To begin with, smartphones sold in the country should be able to receive the IRNSS signal.