Robust revenues: On direct tax collection target and fiscal consolidationContext: Strong direct tax receipts create a fiscal cushion and room for more reformsIntroductionWith little under a quarter left in the financial year 2023-24, the government has met nearly 81% of its direct tax collection target. At ₹14.7 lakh crore, direct tax inflows net of refunds, as of January 10, were 19.4% higher than a year ago.Direct taxesDirect taxes are taxes imposed directly on individuals or entities, and the burden of these taxes cannot be shifted to someone else.These taxes are typically based on a person’s income, wealth, or property. Examples of direct taxes include income tax, corporate tax, property tax, and wealth tax.Advantages of Direct taxesProgressive Taxation: Direct taxes often follow a progressive tax system, where the rate of taxation increases as the taxpayer’s income or wealth increases. This helps in reducing income inequality by placing a higher burden on those with greater financial capacity.Revenue Generation: Direct taxes contribute significantly to government revenue. Since these taxes are levied on income, profits, and wealth, they can generate substantial funds to finance public services and infrastructure development.Economic Stability: Direct taxes can be used as a tool for economic stabilization. During periods of economic growth, tax rates can be adjusted upward to prevent overheating, while during economic downturns, tax rates can be lowered to stimulate economic activity.Resource Allocation: Direct taxes can be targeted to influence certain economic behaviours. For example, tax incentives or penalties can be used to encourage investment, savings, or other activities deemed beneficial to the economy.Simplicity and Transparency: Direct taxes are often considered more transparent and straightforward compared to indirect taxes. Individuals and businesses can easily understand the amount of tax they owe, which enhances tax compliance.Social Welfare: By targeting high-income individuals and corporations, direct taxes can be used to fund social welfare programs, education, healthcare, and other services that benefit the broader population.Optimism regarding futureEconomists believe the exchequer’s net direct tax kitty will end up surpassing the Budget estimate of ₹17.2 lakh crore by about a lakh crore if not more, with the full-year growth settling at around 18%.With Goods and Services Tax inflows also likely to beat the Budget math and non-tax revenues bolstered by a generous dividend from the central bank, overall revenues are likely to go beyond Budget hopes despite a relatively tepid intake from excise duties.Within direct taxes, corporate taxes have grown 12.4% while personal income taxes have yielded 27.3% higher revenues, and this dichotomy may persist in coming years with the number of income-tax returns filed this assessment year hitting record levels (8.2 crore by December 31). Undertaking more reforms in taxationThe healthy revenue uptick and appreciable widening of the tax filing base offers some comfort for the government’s fiscal consolidation hopes going forward, amid apprehensions that this year’s deficit target of 5.9% of GDP may be missed by a small margin.It also creates room for the Centre to undertake more reforms in taxation with a focus on simplifying it further for corporates and individuals.<
li style="box-sizing: border-box; margin: 0px; padding: 0px;">For instance, the multiple withholding tax rates for firms, that often lead to disputes, can be minimised to a handful of lower rates, if not one.
Tax deduction and collection at source (TDS and TCS) rates, including the much-debated levy to track overseas spends, may be brought down a few notches — the taxman can continue to derive intelligence from them, irrespective of the rates.New Tax Regime and Life ChoicesThe new exemption-less personal income tax regime is gaining popularity. The government can encourage better life choices aligned with public policy goals.Encouragement of retirement savings and health insurance is suggested. The 18% GST levy on health insurance needs reconsideration.The GST rates rationalisation is awaited, but the cost of health insurance for lower- and middle-income households is significant. ConclusionFinance Minister Nirmala Sitharaman has signalled the Interim Budget 2024-25 will have no spectacular moves, so a repeat of the 2019 pre-election exercise that rejigged income-tax slabs may be unlikely.But the revenue buoyancy must enthuse policymakers to keep more reform options on the table for the new government to consider.
Editorial 2 : A case diary for the Indian policeContext: The higher ranks in the police force have to be conscious of the many problems that confront policing.Introduction
The three-day conference in Jaipur (in the first week of January) of police officers (Director General of Police level) from across India, was a kind of stocktaking exercise as well as learning experience, as many subjects of contemporary relevance in the area of Information Technology formed the core of the agenda. Public image and Federal issuesThe police in India have a poor public image, with no respectable citizen willing to seek help unless in extreme distress.Despite seven decades after India’s Independence, citizens lack a guardian organization to reach out to the poorest in the community, leading to no upgradation in the reputation of police forces.The police commission has been unable to make much progress in this regard. The growing discord between the Centre and Opposition-led States is further complicated by the perception of the Indian Police Service (IPS) as unreliable intruders.States prefer to have their own recruits, which is likely to exacerbate itself in the years to come.The role of the Enforcement Directorate (ED) and its implications for federal governance must be sorted out sooner rather than later.The attacks on ED officers in some places in India pose a danger to relations between New Delhi and states. More technology adeptIn fairness to the police, however, it must be said that they have become more technology-savvy. It is possibly because we have more educated policemen in the lower echelons than before.It is not bec
ause Indian youth rate a career in the police force very high. It is the sheer high rate of unemployment in India that is driving many to opt for a police job.This is good so far as it goes. The question is whether the young men and women who become constables or sub-inspectors — the two ranks to which there is direct entry — will get an opportunity to display their talent.This is because officers of the IPS alone hog all attention and the glory, depriving the lower ranks of any chance to prove themselves. The situation in most of the world is different.Every recruit, barring a few highly qualified candidates needed for their knowledge of science and technology, starts at the lowest rung of the ladder and rises up the ranks.This is the argument against the IPS, notwithstanding the fact the IPS officer is rated highly for his or her sharp mind and zeal. A major restructuring that narrows the gap between the higher ranks and the lower ranks could help in any exercise to drastically improve the quality of policing.Knowledge and integrity will have to go together alongside genuine empathy for the common man if the image of India’s police force has to improve.This is ambitious but the blending can be achieved if senior police officers make an earnest attempt to change things. An anxiety to educate those at the lowest level in the forces is, unfortunately, not evident among IPS officers.It is unfortunate that the structure of the hierarchy works against spending quality time with the constabulary. Why cannot DGPs and their immediate subordinates spend an hour a day to teaching their ranks how to expand their frontiers of knowledge and in turn, how to use it for the benefit of the common man? The shadow of politicsNo discussion of policing can be concluded without referring to the eternal complaint of the politicisation of the police force. The nagging question of how to insulate our policemen from political caprice dominates all debates on the police.This knotty problem is intertwined with the democratic system of government. It is an art to politely say ‘no’ to a downright illegal demand made by grassroots politicians. Not many can do it with tact. This is an aspect of policing that will continue for decades to come. ConclusionEnsuring the independence and the autonomy of operation for the police force is a pipe dream until the whole polity changes. To chastise the police alone as being a slave to political directives is dishonesty to the core.
