Friday, May 13, 2016

Direct Taxes– Agriculture Income: A Black hole

May 2016                                                                                   Prof Vaidyanathan
The government has at last released some tax numbers but not fully as it used to publish under All India income Tax statistics till 2000. A total of 2.87 crore individuals filed income tax returns in 2012-13, but 1.62 crore of them did not pay any tax – leaving the number of taxpayers at just about 1.25 crore which was close to one per cent of the country’s total population of about 123 crore at that time. As many as 5,430 individuals paid income tax of over Rs.1 crore. Out of this, the tax range was Rs.1-5 crore for more than 5,000 individuals,
The three individuals in the top-bracket of Rs.100-500 crore paid a total tax of Rs.437 crore. The data further said that the bulk of individuals, who filed returns for the assessment year 2012-13 earned an annual salary between Rs.5.5 lakh and Rs.9.5 lakh. Over 20.23 lakh taxpayers earned Rs.5.5-9.5 lakh. Further 19.18 lakh individuals earned salary of Rs.2.5-3.5 lakh that year. Six individuals fell in the high-end earning bracket of Rs.50-100 crore of salary income. In the salary range of Rs.1-5 crore, there were as many as 17,515 individuals.
The number of effective assesses has increased to 5.17 crore in the fiscal year 2015. But only 1.3 crore individuals actually paid the income tax. While the rest did file income tax returns but they had zero tax liability.
From another angle we can see that actually large percentage are captured by Direct taxes. If we take 25 crore households and roughly half of it belonging to “agriculture” households then out of remaining 12.5 crore households. Out of this if 5 crore are assessed that means a large percentage of “taxable” households are covered.
Direct taxes constitute around 50% of the total taxes—that means indirect taxes are the other half. Direct tax to GDP ratio is of the order of 5.5 % in 2015-16.
[http://www.incometaxindia.gov.in/Documents/Time-Series-Data-Final.pdf]
Not only that; in Indian context we need to consider Tax rate and bribe rate. If that is also taken into account then we can “guesstimate “direct tax plus bribe ratio to be nearly 9 to a10%. Which is reasonable outgo from earners.
The larger issue is the complete omission of Agriculture income from the tax net. Long before it was considered as “meager” and it was also felt as a political vote gatherer and exempted. But after green revolution and changes in cropping pattern –to cash crops- much has changed in that front.
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Believe it or not, income figures shared by the Income-Tax Department in response to an RTI application by a retired Indian Revenue Service official has revealed that agricultural income recorded an exponential increase from 2004 to 2013, touching a total of almost Rs.2,000 lakh crore for individual assessees in 2011.
The agricultural income earned by the 6.57 lakh assessees who filed returns in 2011, at nearly Rs. 2,000 lakh crore, is over 20 times the country’s gross domestic product of over Rs. 84 lakh crore at the time, according to the Income Tax Department data shared under the RTI Act. Notably, agricultural earnings are exempt from Income Tax.
The Income Tax Department has launched an investigation on those reporting farm incomes of more than Rs.1 crore a year. Official data pegs this number at 307 in assessment year 2015-16, up from 180 in assessment year 2007-08. The Department is probing 2,746 such cases — Bengaluru recording the highest of 321 followed by Delhi with 275 and Kolkata with 239 cases — from across the country.
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India, China, four others sign pact on tax info sharing


India has signed a multilateral pact for automatic exchange of information on tax issues and developing new tools to tackle the tax evasion. The Organisation for Economic Co-operation and Development (OECD) in a release yesterday said; India, Canada, Iceland, Israel, New Zealand and China signed the Multilateral Competent Authority agreement in efforts to boost transparency by multinational enterprises. The signing ceremony took place in Beijing yesterday.
Other countries which have already signed the pact include Australia, France, Germany, Japan, Liechtenstein, Malaysia, Italy and the UK.
The pact allows all signatories to bilaterally and automatically exchange Country-by-Country Reports with each other. The OECD release added, it will help ensure that the tax administrations obtain a complete understanding of how the multinational enterprises structure their operations, while also ensuring that the confidentiality of such information is safeguarded.
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Myanmar migrant workers quit Thai jobs

An estimated 50,000 Myanmar workers in fishing industry in central Thailand have called it quits and returned home while many more are believed to follow suit sooner or later.
The migrant workers including those who had been employed and stayed in Thailand for many years have decided to return home and would not come back for jobs in this country anymore, Kamjorn Mongkoltreeluck, head of a fishery association in Samut Sakorn province, said on Friday.
Samut Sakorn, about 35 kilometers southwest of Bangkok, houses Thailand’s largest fishing, frozen seafood and food processing industry.
Myanmar migrants have been mostly hired as workers in fishing and food processing industry, unskilled laborers in construction sector and home maids.
Kamjorn said a large number of Myanmar migrants have begun to call it quits from fishing boats, many of which had been anchored ashore for lack of operating licenses or monitoring equipment which might otherwise violate the Fisheries Department’s regulations or might be accused by the European Union of doing the Illegal, Unregulated and Unreported (IUU) fishing business.
The department’s regulations also call for the fishing boats to sail out to sea for a maximum of 220 days in a year, given the rest of 145 days on shore.
The EU, which had bought some 500 million U.S. dollars in fishery products from Thailand in a year, called on the Thai authorities to see to it that no migrants or under-aged workers be illegally employed or abused aboard Thai trawlers. Neither will the fishing boats or skippers operate without licenses.
“Given the IUU charges which the Thai fishing industry is facing, a number of trawlers had to stay ashore, pending the installation of required equipment, issuing of operating licenses and others,” he said.
“That has finally prompted many Myanmar crewmembers to leave for their home country and they would not come back for the jobs which they have just quit.”
Samut Sakorn’s fishing industry, either at sea or on shore, will very likely be adversely affected by lack of migrant workers, the fishery association head commented.
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Turkey demands ‘new formula’ to solve visa-free deal with Europe

The visa-free travel deal between Turkey and the EU is at an impasse and the European Commission must find a “new formula” to solve it, Reuters quoted Turkey’s EU minister as saying on Friday. EU Minister Volkan Bozkir said he was “not very optimistic” about the outcome of the talks being held in Brussels. The comments come a day after President Recep Tayyip Erdogan accused the EU of setting new hurdles for visa-free travel and threatened that Turkey may go its own way if they failed to agree.
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Upper House bid farewell to 53 members


The Rajya Sabha was adjourned sine die today. In his valedictory remarks, Chairman Mohammed Hamid Ansari said the just concluded Session was a short and challenging one.
He said, members showed an extraordinary ability to debate and dissent to accommodate and differ amidst their political compulsions and ideological positions.
Earlier, the House bid farewell to 53 of its members from 14 states who are retiring between June and July this year.
They included 13 from Congress, 11 from BJP, six from BSP, five from JD(U), three each from AIADMK and Samajwadi Party, two each from TDP, DMK, BJD and NCP, one each from Shiv Sena and Shiromani Akali Dal and two Independents.
The prominent retirees included Union Ministers, M Venkaiah Naidu, Nirmala Seetharaman, Piyush Goel and Mukhtar Abbas Naqvi, all BJP.
The notable retirees from the Congress included Mohisina Kidwai, Ambika Soni, Oscar Fernandes and Jairam Ramesh. In his farewell address, Chairman Mohammed Hamid Ansari said, every retiring member has contributed significantly to the functioning of the House. Prime Minister Narendra Modi said, the Rajya Sabha has the privilege to bid farewell to its retiring members unlike the Lok Sabha.
He said, the members had the opportunity to experience two successive governments in the last six years. They were party to all major decisions.
But Mr Modi regretted that the House could not clear the Goods and Services Tax (GST) Bill and the Compensatory Afforestation Fund Bill, 2016. He underlined that the GST Bill would have immensely benefited all the states, especially Uttar Pradesh and Bihar.
The House had 15 sittings during which it deliberated for over 69 hours. It passed or returned 12 government bills. The House had two Short Duration discussions on drought and AgustaWestland Chopper Deal.
Meanwhile, Minister of State for Parliamentary Affairs Mukhtar Abbas Naqvi has said that the productivity of Lok Sabha in the just concluded Budget Session was over 117 per cent. The Rajya Sabha registered around 87 per cent productivity.
Briefing media in New Delhi today, he said the Lok Sabha passed ten Bills and the Rajya Sabha approved 12 legislations. The major Bills passed during the session included the Finance Bill and the Railways Appropriation Bill.
Both the Houses also approved the Insolvency and Bankruptcy Code, the Mines and Minerals Bill and the Anti-Hijacking Bill.
Referring to the 45 Bills still pending in the Rajya Sabha for consideration and passing, Mr Naqvi said special efforts will be made to clear this backlog in consultation with all parties. He expressed hope that the GST Bill will be through in the next session of Parliament.
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Raman Singh denies allegations on AgustaWestland chopper deal:


Chhattisgarh Chief Minister Raman Singh has denied the allegations of Swaraj Abhiyan leaders that his Government had illegally purchased an AgustaWestland helicopter. In a press conference at Raipur last night, Mr. Singh said, the allegations levelled by former AAP leader Prashant Bhushan are baseless and politically motivated. Stressing that the deal was done through a global tendering process, Chief Minister said, the charges against a BJP-ruled state was an attempt to dilute the issue.
Earlier yesterday, Swaraj Abhiyan leaders Prashant Bhushan and Yogendra Yadav in Delhi had accused the Raman Singh government of paying 1.57 million dollars commission to a company registered in tax-haven British Virginia Islands to procure the chopper.

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