India | Bulldozed through, bill gives Indian taxman free rein
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Bulldozed through, bill gives Indian taxman free rein

Finance Minister Arun Jaitley's bill, rushed through parliament, gives tax officials greater powers. It also removes brakes on political funding

March 30, 2017 2:50 PM (UTC+8)
Indian Finance Minister Arun Jaitley. Photo: Reuters
Indian Finance Minister Arun Jaitley. Photo: Reuters

While the Indian media was busy analysing the outcome of elections in its most populous state, Uttar Pradesh, and the choice of a Hindu priest as its chief minister, Finance Minister Arun Jaitley sprang a surprise that may have serious implications for the privacy of citizens and funding for India’s political parties.

On March 22, he introduced a Finance Bill to enact measures in his recent Union Budget, which had been tabled in Parliament on February 1. Normally, such bills are passed without great ado, but this time legislators in India’s lower house, the Lok Sabha, were in for a rude shock. Jaitley had tacked on 30 pages of amendments – amendments that could affect up to 40 existing Acts, many of them unrelated to taxation, the purported subject of the bill.

The amendments had been introduced, without much discussion – and with a request from the treasury, via the Speaker, to suspend normal proceedings in the house in order to pass them – less than 48 hours before the legislation was taken up for scrutiny. Though
opposition lawmakers did raise objections to certain provisions, the bill was passed, as the ruling Bharatiya Janata Party (BJP) and its allies enjoy an absolute majority.

The bill was later presented before parliament’s upper house, the Rajya Sabha, on March 27, where the BJP is a minority. But Jaitley cleverly circumvented any trouble by introducing it as a Money Bill, meaning it would not require assent from the upper house under Indian law.

One of the most worrying facets of the bill is that it will expand the power of income-tax officials. From now on, they will be able to enter homes and offices in order to conduct search or seizure operations without having to explain their actions, even to the tax tribunal. And they can, without any explanation, investigate a person or a company’s affair’s going all the way back to 1962.

Previously, Section 132 of the Income Tax Act, 1961, made it mandatory for tax authorities to have “reasons to believe” that someone had undisclosed assets, and/or was unwilling to disclose information the IT department needed, before holding a raid.

The bill also offers political parties something of a windfall. It will allow Indian companies to donate as much money as they like to parties, by removing a cap linked to net profits that has been in force for years. Henceforth, voters won’t know who is funding who: all donations will be anonymous. An earlier requirement that companies officially declare its political contributions has also been erased.

Funding for elections has long been a major factor keeping India’s shadow economy ticking. The expenditure limit for a candidate contesting a seat in the Lok Sabha was, up until now, pegged at Rs 7 million (US$108,000), but actual expenses often surpass that figure by several multiples, thanks to illicit funding. Many believe the amendment will only make such underhand dealings more ubiquitous.

Another amendment gives the government greater power over the functioning, and staffing, of tribunals or quasi-judicial bodies set up to oversee proper functioning of regulators and government agencies.

Critics say this runs counter to the promise of ‘Minimum Government, Maximum Governance’ that the BJP-led National Democratic Alliance coalition promised while campaigning for elections in May 2014, and compromises the independence of such bodies.

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