Limit Power of Tax Officials & Aid Wealth Creators: Mohandas Pai

Mohandas Pai talks about wealth creators, tax terrorism and what the government can do to encourage entrepreneurs

(Photo: Altered by The Quint)

Video editor: Varun Sharma

On Independence Day this year, PM Modi made a reference to wealth creators. He urged the citizens of this country to not view wealth creators with suspicion but lauded their contributions and their efforts in alleviating poverty alleviation.

However, for the past fortnight, the national conversation has revolved around tax terrorism, overbearing tax officials, and whether or not India truly offers a conducive environment to entrepreneurs, in the wake of Cafe Coffee Day co-founder VG Siddhartha’s untimely death due to alleged harassment by taxmen.

While the prime minister may have offered a verbal promise to ‘wealth creators’, The Quint spoke to Mohandas Pai to understand what PM Modi must do now to turn his words into action.

‘More Communication With Industries, Less Powers for Taxmen’

Welcoming PM Modi’s praise for wealth creators in the context of ‘tax terrorism’, investigating agencies running amok and low morale in the industry, Mohandas Pai elaborated on how wealth creators contributed to job creation and the country’s growth.

“The one point that could have been said with more emphasis was that there needs to be more communication between businesspeople and the PM. He should get their views to take appropriate decisions as a leader. And as a leader he should meet with people from different industries. Also, there is no need for such secrecy about tax. Taxation raises trust issues.”

Mohandas Pai

Pai added that apart from sending a strong message that tax terrorism would not be tolerated, the powers granted to tax officials to make arrests must be controlled.

“He must remove powers of officials to make arrests without going to a judge. According to the Income Tax Act, you can arrest a person if they fail to make a payment that is due against a demand raised by the tax recovery officer and put them in jail. This case could be in appeal, we don’t know. The official must submit the data to a magistrate, summon the defaulter and then issue an arrest warrant,” he said.

Alluding to the fear among taxpayers of being wrongly treated by officials of investigating agencies like the Enforcement Directorate, the CBI and others, Pai said that a code of conduct would have to be laid down.

Pai also said that a broken justice system had left citizens to the mercy of the courts.

“There are many cases where things get stuck in court for a long time. Being wealth creators, should we go fighting court cases or should we run our businesses. Also, there are many laws in the country with criminal liability like CSR. What kind of country puts criminal laws on CSR which is supposed to be a philanthropic activity. Not filing tax returns and not declaring tax history can get you criminally prosecuted. This power is often misused, it must be used only in a certain way,” he said.

‘We Expected Growth of 8% in the First Year of Modi 2.0’

A complacent government, elections, an ailing finance minister in the fourth quarter, budget, the Kashmir issue in the first quarter of this year, and floods in the second quarter could make India’s growth stagnate at 6 percent, said Pai.

“This is the first year of Modi 2.0 where we want 8 percent growth. The government doesn’t take enough decisions – improve liquidity for lending, improve sentiments, bring back investment culture. Next year will be a disaster otherwise and we will miss the biggest opportunity to become a $5 trillion economy. This is a very serious issue. We know PM is looking but we need the animal spirits to return.”

Mohandas Pai

He also said that all Indian businesses were aware of the long-term potential of the Indian markets and that’s why they had invested in it. What they needed was to survive short-term.

‘Animal Spirits Need to Return, We Cannot Survive any More Shocks’

“The industry is in no position to take any more shocks. So please don’t give us any more shocks. Please keep the policy regime very stable, let the lower interests seep into the economy and the mood be uplifted. Any more sudden changes, I think we will not be able to get up again,” he said.