October 24, 2018 @ 2:00 am

24 OCTOBER 2018

Trouble at the top 

Firm intervention is needed to end the unsavoury controversy in the CBI

At one level, what is going on in the Central Bureau of Investigation (CBI) is a ‘turf war’, a battle of egos between two individuals at the helm. But the unsavoury developments involving the CBI Director and its Special Director are reflective of amuch deeper malaise – a big rot at the very heart of the premier investigating agency. That the CBI registered a First Information Report against its own Special Director is extraordinary. The most troubling aspect of the ongoing crisis involving Director Alok Verma and Special Director Rakesh Asthana is that only one of them will be proved right; either way, it is the agency that will be shown in a poor light. If the Director is justified in embarking on a high-profile probe intobribery charges against Mr. Asthana, it can only mean that corruption is so pervasive that even the second-in-command in the agency is not beyond demanding Rs. 3 crore to let someone off the hook. On the other hand, if Mr. Asthana is shown to be wrongly implicated, and his own charges – set out in a complaint to the Central Vigilance Commission – that other CBI officers are interfering in ongoing probes are proved right, the situation will be no better.It cannot be forgotten that this controversy was preceded only recently with two Directors of the CBI coming under a cloud. The Supreme Court held that the charges that Ranjit Sinha, when heading the agency, sought to help the accused in several cases and interfered in ongoing probes were ‘prima facie credible’; as a result, he was asked to keep away from the 2G telecom cases. Similarly, A.P. Singh, another director, was booked last year for alleged links with meat exporter Moin Qureshi. Clearly, the existing procedure for the appointment of CBI Directors, which is made by a committee comprising the Prime Minister, the Chief Justice of India and the Leader of the Opposition, has not stripped the office of controversy.

And now as well, it is the Qureshi case that continues to haunt the agency. Its investigating officer, a Deputy Superintendent of Police, has been arrested on the charge of fabricating a statement by a Hyderabad-based businessman “to corroborate baseless charges” made by Mr. Asthana against Mr. Verma in a complaint to the CVC. The CBI labours under a dual image: an independent agency in the perception of those disillusioned with the conduct of the jurisdiction police, and a ‘caged parrot’ or a handmaiden of the ruling party at the Centre in the eyes of the national Opposition.Recent developments, in which Central agencies are seen as targeting those in Opposition parties, add to the latter perception and do not augur well for its credibility. To a large extent, the political leadership must bear the primary responsibility for such controversies. It is difficult to ignore the fact that Mr. Asthana’s appointment as Special Director was made despite Mr. Verma’s vehement objections about his suitability, something the CVC chose to overrule. In such circumstances, it is up to the CVC and the Centre to address the present crisis. A good place to start will be to take Mr. Asthana, whose name already figures in a case, temporarily out of the agency to ensure an impartial probe.

In the net

A wider direct tax base is good news – but the share of direct taxes in the total is still low

The steps taken by the Union government over the last few years to widen its tax base may finally be yielding some rewards.The total number of tax returns filed in the country increased by over 80% over the last four financial years, according to data released by the Central Board of Direct Taxes on Monday: from 3.79 crores in 2013-14 to 6.85 crores in 2017-18. Further, the direct tax to GDP ratio rose to 5.98% in 2017-18, the highest it has been in the last 10 years. The average income reported by individual and corporate taxpayers also witnessed a significant rise in the last three years. With tax growth rate surpassing the growth in GDP, the tax buoyancy factor rose to 1.81. This rise in tax compliance has beenattributed to the various measures taken by the Union government to increase compliance, including better gathering of information about sources of income, ease of getting refunds, and lowering of various other tax compliance costs.The total direct tax collection is estimated to be over Rs. 10 lakh crore in 2017-18, an increase of about 18% from the previous year.

The widening of the tax base is clearly good news for a government which, from the very beginning of its tenure, has declared its intent to improve tax collections. But the contribution of direct taxes to the total amount of taxes collected by the government, which is currently 52.29%, is still below what it was when Narendra Modi became Prime Minister. In fact, the share of direct taxes has fallen every single year since 2013-14, except this year. It is also far too low when compared to its peak of over 60% in 2009-10. In other words, most of the rise in the total tax collection in the last few years has come from indirect tax collections. This year, direct tax collection increased at a higher rate compared to the collection of indirect taxes. Going forward, a further increase in the share of direct taxes will help the government to lower regressive indirect taxes that impose a significant burden on the poor. Direct taxes are also a better choice from the standpoint of economic efficiency as they help avoid the severe distortionary effects of indirect taxes such as the Goods and Services Tax. Amidst increasing global tax competition, India is likely to face pressure to bring down corporate tax rates if it wants to maintain its stature as an attractive investment destination. Efforts to draft a new direct tax code, however, are yet to yield fruit due to bureaucratic delays. The government will do well to address this issue.

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