Why Arun Jaitley must amend regressive Finance Act 2017

Union finance minister Arun Jaitley has asked for suggestions to improve key amendments to the Income-Tax Act in the Finance Bill 2017 passed into the Finance Act 2017 by the Lok Sabha last week.

Here are four.

First, remove clause 50 that amends Section 132 of the Income-Tax Act and allows search and seizure by the Income-Tax department without disclosing to the assessee being searched why he or she is being searched. This is tax terrorism.

There is no euphemistic way to describe this draconian, anti-democratic clause. It flies in the face of natural justice. Its retrospective effect makes it even worse, if that were possible.

It's clear now why Jaitley hasn't repealed Pranab Mukherjee's regressive retrospective law that has mired firms like Vodafone and Cairn India in endless litigation to the delight of lawyers.

The mindset that such laws reveal does not belong to a ministry charged with serving taxpayers, not intimidating them. After all, their taxes pay the salaries of the finance minister and his bureaucrats.

The search and seizure clause, without disclosing cause to anyone, including the tax appellate tribunal, makes a mockery of justice. It must be deleted.

Second, where disclosure is necessary Jaitley has removed it. An amendment in the Finance Bill 2017 ended the obligation of corporate donors to reveal in their balance sheets the name of the political party they have donated to. A more appalling amendment is hard to imagine. Jaitley's weak justification: corporates complain that if they reveal which party they've donated to, other political parties pressurise them to donate to them as well.

A more undergraduate explanation could barely have been contrived.

The public's right to know who donates how much to whom supersedes corporate donors' delicate sensitivity to pressure from political parties. This amended clause in the Income-Tax Act 1961 too must be deleted from the Finance Act 2017.

The third affront to transparency and commonsense is the concept of electoral bonds. This amendment allows companies to buy bonds from banks of any amount. The bonds are like a bank draft. They can be donated to a political party which receives immediate credit of the amount in its bank account. No one but the bank knows who the donor is, how much was donated, and to which political party.

The public certainly won't know. In a democracy, the public should be the first to know. This clause too must be scrapped. Electoral bonds are a naked device to hide corporate donations, including those from foreign entities, to political parties. They put the business-politics nexus behind a purdah.

The fourth anti-democratic and anti-people amendment is this: by replacing some tribunals and merging others, Jaitley has struck a blow against fairness and justice.

There is a case for merging some tribunals with overlapping functions to create efficiencies. But to merge an airports tribunal with a telecom tribunal, as the amendment does, defies logic. Moreover, placing tribunal members' appointments and removal under the government's control compromises them and constitutes an assault on their independence.

It reflects poorly on the government that it has allowed Jaitley and his bureaucrats in the finance ministry to pass such amendments, which will escape neither the scrutiny of the law nor of public opinion.

Jaitley says he can't think of better alternatives to make electoral funding transparent. His amendments in fact make it more opaque. There are, of course, genuine ways to make political funding more open.

To begin with, reveal donors' names. If companies are honest, they will set up electoral funding trusts as the Tatas and Birlas have long done. Instead of encouraging other corporates to follow their transparent example, Jaitley's amendments encourage them to operate behind a veil. Nothing could be more regressive.

The end result of all this chicanery? Companies which want tax deductions under Section 80GGC of the Income-Tax Act will donate anonymously by cheque. No disclosure of the donor is required in their balance sheet.

Those companies which want even greater anonymity will donate through electoral bonds - which, however, are not eligible for tax deductions. Foreign companies will be especially delighted by this new artifice.

Jaitley, of course, will save tax for the exchequer on electoral bond donations but the public he serves will be shortchanged of the most basic commodity it deserves: transparency.

Also read: Why is Modi government hell-bent on diluting the Right to Information Act?