A group of tax officers has suggested hiking tax on super-rich to 40 per cent, levying pandemic cess and imposing higher tax on foreign companies to ensure the Government’s cash till runs long enough to meet the financial exigencies arising out of the coronavirus situation.
In its ten suggestions for generating more revenues, the Indian Revenue Service (IRS) Association has also mooted re-introduction of wealth tax, raising the Google tax and inheritance tax, among others.
A 44-page paper titled ‘Force’ which stands for ‘Fiscal Options & Response to COVID-19 Epidemic’, dated April 23, has been sent to the CBDT (Central Board of Direct Taxes) chairman P C Mody and the board members.
The paper, accessed by PTI, has suggested that tax relief should be restricted to only honest and compliant taxpayers, especially those filing returns on time as there have been many instances of non-filing of returns, hike in non-deductions and TDS withholding apart from rising under-reporting of tax through bogus loss claims.
A ‘give it up campaign’ like that was done for LPG subsidies has also been proposed. As per the suggestion, the tax department can encourage the super-rich and those willing to give up at least one tax subsidy/ tax deduction/ tax concession for a year, it added.
The paper has been prepared by 50 senior tax officers after CBDT sought ideas from field officers on ways to revive the economy and improve revenue collection.
Some of the short term measures suggested in the paper include a super-rich tax by raising the highest slab rate to 40 per cent for those with an income above Rs 1 crore from 30 per cent, and re-introduction of wealth tax for those with over Rs 5 crore annual income.
It noted that the surcharge introduced in the Budget 2021 on the super-rich may generate only Rs 2,700 crore and hence the call to up it on the super-rich. Individuals having a taxable income of Rs 1 crore are considered super-rich.
The revenue gain associated with both options should be worked out to see whether the gains attached with the latter option score better in terms of a cost-benefit analysis, says the paper, adding this way government can collect an additional Rs 50,000 crore.
For the medium term, the paper has suggested raising additional revenue from foreign companies operating in the country. This can be done by hiking surcharge from 2 per cent on a Multi-National Company’s (MNC) income ranging Rs 1-10 crore and to levy 5 per cent surcharge on income exceeding Rs 10 crore, it added.
“The surcharge has not been revised (for) long time. So it is time that a flourishing market like India, with its huge prospects, flexes its customer base muscle”.
Further, the paper has called for imposing a Covid-19 cess to help mobilise additional revenues. The one-time cess of 4 per cent can help finance capital investment, it said.