Modi must stop Jaitley from punishing honest taxpayers

If you earn more than Rs 50 lakh a year, get ready to reveal all: land, gold, silver, jewellery, cash, cars, yachts.

New income tax rules will apply from the current financial year. The bureaucrats in the finance ministry, many of them hand-me-downs from the UPA government, say soothingly that only 1,50,000 "ultra-rich" Indians will be affected by the new rules.

The idea behind this intrusive new income tax return (ITR) form is to weed out black money. It won't do that for the simple reason that most of the 1,50,000 ultra-rich Indians with taxable income above Rs 50 lakh a year are highly-paid professionals who rarely fudge on taxes and own yachts.

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Those who do fudge are traders, brokers and businessmen who often don't pay tax at all. The new tax rules will do nothing to deter them.

The latest brainwave of the finance ministry is, like many of its previous brainwaves, going to end up making honest professionals fill up interminable forms. As one business daily reported: "While professionals who earned above Rs 50 lakh per annum would declare their wealth, others might not. There remains a doubt how many will disclose apart from working professionals. There will be strict penalties and prosecution involved. So, enforcement remains a challenge."

The larger question is: are we witnessing the return of the nanny state? Minimum government, maximum governance means clean and transparent administration, not intrusive, suspicious school masterish governance.

To be fair, many ministries in the Modi government have followed the principle of non-intrusive but proactive and transparent governance.

The power ministry under Piyush Goyal, for example, has innovated a mechanism to allow citizens to monitor online in real time the progress of village electrification. Reacting to reports that some villages were not fully electrified as claimed online, Goyal has now initiated a verification process. An independent audit could follow. This is non-intrusive, proactive, transparent governance.

Similarly, the transport ministry under Nitin Gadkari is building over 18km of highways a day and sharing progress reports on a regular basis along with long-term projections.

The external affairs, railway and petroleum ministers too have put in place mechanisms to share with the public key developments in their ministries. External affairs minister Sushma Swaraj and railway minister Suresh Prabhu are especially active on social media to address everyday concerns.

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Even the defence ministry under Manohar Parrikar, after initial missteps, has begun issuing cogent periodic statements on equipment procurement, new weapons technologies, and foreign collaborations with India's private and public sector for new-generation fighter jets, submarines, tanks and missiles.

The finance ministry alas remains as opaque as ever. Many of its senior officials hark back to the dark days of former finance ministers in the UPA government: P Chidambaram and Pranab Mukherjee. Finance minister Arun Jaitley recommended to Prime Minister Narendra Modi in late-2014 the appointment of Arvind Subramanian as chief economic advisor. The choice would have pleased Chidambaram (whose choice he actually was) but not many others.

Also read - Salaried class is the biggest loser in Jaitley's Budget

The finance minister alienated the salaried middle-class in the 2016 Union Budget by imposing a tax on a part of an employee's provident fund withdrawal. He was forced to roll back the tax following public and media outrage. Many of the edicts from the finance ministry over the past two years have smacked of bureaucratic pettiness, bereft of real vision.

Most of the innovations that have struck a chord - Jan Dhan Yojna, Make in India, Digital India, Start-Up India, crop insurance for farmers, pension reforms - have originated from the prime minister's office (PMO), not the ministry of finance (MoF).

Also read - 5 ups and 5 downs of Jaitley's Budget 2016

Even when it does liberalise, as it did last month by allowing 100 per cent FDI in e-commerce marketplaces, the government imposes nanny-state conditionalities. In an editorial last week, Mint correctly pointed out: "The National Democratic Alliance (NDA) government's policy regarding foreign direct investment (FDI) in business to consumer e-tail, announced on Tuesday, has made a virtue of necessity. Unfortunately, it has hedged the mildly progressive move with conditions that undercut it and illuminate the shortfalls of the NDA's stance on FDI in the broader e-commerce and organized retail space. Among the riders attached to the policy, no vendor can account for more than 25 per cent of the sales of a marketplace e-commerce entity. And such entities are barred from influencing the prices of goods sold via its platform - by, say, remunerating vendors for discounts on sticker prices. This is an egregious display of micromanagement."

Micromanagement is not what this government should be doing. The sooner PM Modi delivers that message to his finance minister the better. Otherwise the buck for a regressive nanny state will stop at the doorstep of 7, Race Course Road.