Reading Comprehension - 1

Monday, June 05, 2006

Surreal, not Saral

Income tax lawyers can rejoice. Government has just made filing tax returns considerably more complicated. Instead of the earlier one-page Saral form, the IT department is set to introduce Form 2F.

The latter is a four-page form and promises to make life far more complicated for salaried taxpayers. They will now have to provide a slew of details, including household expenses, cash balance, bank balance and receipt of gifts.

This would in effect involve totting up income and expenditure just as in a company balance sheet. The revenue secretary has justified the new form on the grounds that it would reduce the likelihood of 'intrusive investigation'.

But, unfortunately, replacing Saral does just the opposite - it smacks of economic policing. There is absolutely no rationale for finding out how people have spent their money as long as they are paying income tax.

It also goes against the worldwide trend of simplifying filing of tax returns. The logic for this is that the easier it is for an individual to file returns, greater the likelihood of tax compliance.

The revenue department, it seems, has learnt none of these lessons. The new form is a throwback to an earlier age. It is more likely to be an impedi-ment in widening the tax net.

It also has the potential to further increase the already bloated babudom of the IT department thereby increasing the cost of collecting taxes. The finance ministry should be worried that total tax revenue collection in India is around 16 per cent of the national income.

This is not only much lower than the US, which has a tax-GDP ratio of over 25 per cent, and western European nations with a ratio of over 30 per cent, but also lower than developing countries like Mexico.

Government should be putting its mind to raising the tax-GDP ratio by measures such as bringing agricultural income into the tax net and targeting the black economy.

But instead of finding ways to increase tax collection, government has made it more difficult for genuine taxpayers to file returns. Tinkering around with income tax return forms typifies the mindset of the Indian state.

It usually, and often willfully, misses the wood for the trees. Instead of tackling issues vital to the health of the economy, government has chosen a soft target: The salaried middle class. Instead of making life simpler for law-abiding citizens, the state has chosen to harass them.

Questions:

1. Is the author happy about the change in filling tax returns?

2. According to the author, the government should pay more attention to..?

3. What is the tax revenue collection in US?

4. Is India's total tax revenue collection higher than Mexico's?

Word power:

1. surreal - adj. dream like, strange

2. totting - v. add, total

3. impediment - n. a hindrance or obstruction

4. bloated - adj. excessively large or wealthy

5. tinkering - v. path, fix, tamper with