All levels of government tirelessly remind us of our duty to pay to the State what we owe. They should. We can't question either the legitimacy or the timeliness of their crusade against tax evaders and non-payers of various levies.
The government may not do a great job of telling the people where their tax rupees go - compliance could improve if they did that -but it remains an insufficient excuse for our unwillingness to pay. That's the law and if we have pretensions to being responsible citizens it is our duty to comply.
Nor can we take shelter behind the charge of government robbing Peter to pay Paul. Yes, the burden falls disproportionately on those who are already 'in the net' but the answer to that lies in trying to bring more into the net - by insisting on proper receipts for goods and services we buy, for instance.
If we haven't yet made out a case for our duty to pay taxes and levies let's say unequivocally those who do not pay their dues are doing a disservice to the country - and to their fellow citizens who then have to cough out more to compensate for them.
Whatever the reasons, we have an appallingly low tax to GDP ratio. We spend more than we earn, obliging us to beg and borrow and bury Iqbal's exhortations for Khudi - or the idea of sovereignty for which we say we are willing to lay down our lives. Not sure if that is force of circumstance or hypocrisy.
We make out an unconvincing case when we claim 'everyone pays a tax in one form or the other' - on phone calls or petrol or electricity. That is payment for what we consume; not a tax on what we earn.By not willingly contributing to direct taxes we unwittingly invite indirect taxation that is regressive in that it hurts the poor more and stokes inflation.
What weakens the government's hand is that it does not practice what it preaches. It is never in a hurry to pay back what it owes. Does anyone recall receiving a tax-refund check in the mail, as happens, in routine, in say Canada or the UK?
We can understand the government fighting binding verdicts of international tribunals in cases where it reneges on its contractual obligations. It is well within its rights to exhaust all possible remedies.
We can look the other way when it does not make timely transfers to the provinces under the NFC award. We can overlook government's own complicity in the spiraling 'circular debt'. We can write it off to fiscal compulsions when the government forces cost escalations on development schemes by skimping on release of funds.
What we cannot understand is the government sawing away the branch it is sitting on.
The government never tires of underscoring the criticality of exports. We can, at a cost, take care of the rupee gap by printing notes. But this option is not available when it comes to the dollar gap. If remittances, import contraction, FDI, and export growth are not enough to plug this hole you just have to go out with the infamous bowl!
Remittances might grow but won't be enough. FDI faces strong structural constraints. Imports have been pared to the extent possible - if anything they might soon start to surge. Our only real hope is Exports, which has issues enough of its own without the government picking the exporters' pockets.
Exporters were asked to contribute 0.25% of their proceeds to the export development fund set up to have a dedicated account to address the weaknesses of our export base - skill development, innovation, infrastructure. Exporters obliged but the government had other designs: it continues to transfer bulk of the collections for budgetary support!
Then there is this festering wound of refunds. Everyone agrees exports should be zero-rated but such are the government's fiscal woes that getting refunds has become an industry of its own. Exporters spend more time chasing refunds than, say, on productivity enhancement.
In fact one doesn't even know for sure the exact amount the government owes to exporters on this account. Exporters claim some 400 billion rupees are due, most of it for more than ten years, but the government insists it is no more than 160 billion. How do you go about reconciling the difference?
Going forward, the only answer is to have a dedicated account for refunds. This will not necessarily expedite refunds but at least there will be clarity about the amount due. Indeed, the government itself should be doing this in the interest of better book-keeping - and, dare one say, more openness?
It is not that dedicated accounts of one form or another are unheard of. Remember the 'dam fund'? Or for that matter, the privatization fund (the proceeds not to count as government revenues but specifically earmarked to retire debt). Or even the Export Development Fund - the government may not transfer the whole amount but at least there is no ambiguity on what the government owes.
If the government functionaries are weary of having a specific refund account - we know accrual accounting doesn't fit well with them - at a very minimum they should be able to bring out a monthly statement showing the amounts collected under this head and the amounts refunded. This will not only meet the requirements of good accounting but also put to rest the dispute on what the government owes.
The worst sufferers, when you have substantial sums blocked for at least three months, quite possibly many more, will be the small and medium enterprises. The bigger players will have the liquidity to sustain it but for the SMEs it is sure to sound the death knell.
Does the government wish to give the last push to SMEs, and by extension to exports, just to show higher collection? That's wrong thinking fraught with huge risks to export prospects.
The newly introduced (and untested) FASTER system is full of glitches. It's a typically bureaucratic cover-up.
Let the government start paying what it owes - not as alms to beseeching exporters, as the former PM did in a well-publicized ceremony, but as an overdue settlement. This will help exports - and give the government the moral high ground to ask for taxes.
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