Should Indian MPs Reveal Their Tax Returns?
This is a discussion on Should Indian MPs Reveal Their Tax Returns? within the RTI News & Discussion forums, part of the RTI News, Circulars and Decisions category; Reported by Tripti Lahiri in Blogs.wsj.com on July 5, 2012 Should Indian MPs Reveal Their Tax Returns? - India Real Time - WSJ A Right-to-Information request filed two years ago ...
- 07-05-2012, 11:18 AM #1
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Should Indian MPs Reveal Their Tax Returns?
Reported by Tripti Lahiri in Blogs.wsj.com on July 5, 2012
Should Indian MPs Reveal Their Tax Returns? - India Real Time - WSJ
A Right-to-Information request filed two years ago could eventually lead to Indian lawmakers having to reveal their annual tax returns, if the petitioners can convince officials that this is in the public interest.
But is it? Or is it a serious invasion of privacy?
Anil Bairwal, national coordinator for the Association for Democratic Reforms requested the tax returns of 20 MPs [see a full list of names at the end, with links to their 2009 assets declarations] from various parties, in an RTI request filed in February 2010.
Mr. Bairwal says that in the interest of transparency, and given the Indian political milieu, where many voters believe that politician enrich themselves while in power, MPs should disclose the details of their earnings and taxes paid.
“Why not make the returns public?” says Mr. Bairwal. “These guys are making policy.”
Indian political candidates already have to file statements declaring their assets and debts each time they run for office. And federal ministers must file such declarations every year. But Mr. Bairwal said that these statements don’t reveal enough.
“Let us say somebody has assets of 50 lakhs [5 million rupees] and it has now become 5 crores [50 million rupees],” said Mr. Bairwal. “The assets would just show what it was earlier and what it is now. It has not shown how it has increased.”
Sometimes it is possible to deduce why assets have increased – often it’s due to previously declared land or jewelry appreciating over time. But in other cases, politicians have acquired expensive new assets such as acres of land, and it isn’t clear how.
An asset declaration is basically a list of cash in bank accounts, stocks and shares owned, and jewelry and property held by candidate or his or her spouse. An income tax statement would provide the amount and sources of income — salary, business, sale of property, interest, dividends, and so on — in any given year, as well as deductions taken and taxes paid. From this year, Indian income tax returns are also supposed to include details of bank accounts and assets outside India.
Mr. Bairwal says that if the tax returns were public, voters could see if reported sources of income tallied with new assets acquired. If insufficient reported income appears on returns, that fact could strengthen the case for a corruption investigation of the sort known as a “disproportionate assets” case – when a person has more wealth than their legitimate sources of income could have produced.
In the case of the 20 MPs for whom the association has sought tax returns – the Association for Democratic Reforms isn’t accusing any of them of illegally enriching themselves through politics. Many of those on the list below don’t report particularly high assets, such as the Biju Janata Dal’s Mohan Jena, who declared three million rupees (about $54,000) at the time of the 2009 elections, while Dip Gogoi, of the Congress Party, declared 2.5 million rupees ($45,000).
Instead, the MPs were selected as representing a cross-section of prominent politicians from the main parties for a test case that the organization has been pursuing for over two years now.
“We wanted to make sure we did not come across as if we were targeting MPs of a particular party,” said Mr. Bairwal.
The information request is proceeding slowly. The Income Tax Department sent copies of the request for the tax returns out to its various branches, since the MPs come from all over the country and many file their returns in their home state. It is the responsibility of each of those local branches to respond to the RTI request.
The only responses so far have been for the Congress Party’s Kumari Selja, minister for housing and poverty, and the Rashtriya Lok Dal’s Ajit Singh, minister of aviation, from the Delhi branch of the Income Tax Department. Since Mr. Bairwal’s request was for information provided to the government by people who expected it to be kept confidential, the RTI Act requires the official responding to the RTI request to take into account whether the people who provided the information, in this case their personal financial data, have any objection to it being released.
Both ministers, known in this case as “third parties,” did.
“The third parties submitted their replies stating that the information sought under the said RTI application relates to personal information, the disclosure of which has no relationship to any public activity or interest,” said the letter from the Delhi tax branch, declining to disclose the returns. The letter, shown to The Wall Street Journal by Mr. Bairwal, quoted from both ministers’ remarks.
Ms. Selja’s response was fairly brief. Mr. Singh’s response was longer, citing a previous Central Information Commission order that held “that assessment details are definitely personal information…disclosure of such details cannot be permitted unless there is overriding public interest justifying disclosure.” The Central Information Commission is the final arbiter in Right-to-Information cases.
He also quoted the Black’s Law Dictionary definition of “public interest” as something “in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. It does not mean anything so narrow as mere curiosity.”
Mr. Bairwal appealed the decision, disagreeing that this information wasn’t in the public interest. The Income Tax Department still withheld the tax returns. He then made a second appeal to the Central Information Commission, the ultimate arbiter in Right-to-Information cases, and was heard by a commission official in early May. The official then had to go back to the ministers to sound them out again, and seek their responses to Mr. Bairwal’s arguments.
It’s lengthy process. But Mr. Bairwal and his organization have reason to be a little bit optimistic. The reason political candidates have to file statements of their assets (and disclose pending criminal charges against them) is because the Association of Democratic Reforms successfully convinced the Supreme Court in 2003 that that was in the public interest through a lawsuit.
In that judgment, which Mr. Bairwal quoted in his first appeal to the Income Tax Department, the court held with regard to MPs, “that by virtue of the office they hold, there is a real potential for misuse…the disclosure will serve as a check against misuse of power for making quick money.”
And in a previous order in December 2009, an official of the Central Information Commission had granted an income tax whistle-blower’s request to see the tax returns of a prominent cardiologist and the hospital he headed at the time.
In that decision, the information commissioner held that since there was no legislation in India on privacy, “the citizen’s right to information would be given greater weightage.” The commissioner added that, “It certainly serves a larger public interest, if tax evasion is curbed.” The doctor then turned to the Delhi High Court, which stayed the commissioner’s order in January 2010. Arguments in that case are continuing.
But in spite of the widespread anger against corrupt politicians, one tax expert suggests that disclosing personal income tax returns may not necessarily be in the public interest. Satya Poddar, partner in the tax policy practice of the Indian arm of consulting firm Ernst & Young, suggests that activists aren’t likely to find evidence of illicit earnings in personal tax returns.
“The information that is available in income tax returns will not provide the information that the public is really interested to know,” said Mr. Poddar. “Illegal money is never reported.”
Meanwhile, he added, the fear that income taxes will not be kept confidential could have a harmful effect on tax compliance rates, which refers to the percentage of the estimated number of people in a given tax bracket who pay taxes.
Voluntary tax payment rates in the United States have been above 80% for decades. In India, perhaps 50% to 60% of those who should be paying income tax are, according to a paper by Surjit Bhalla of Oxus Investments .
“In the policy circles the requirement of secrecy of tax return information is considered very important,” said Mr. Poddar. “This is believed to lead to better compliance.”
Whatever Indian officials decide, it might have larger ramifications than for India alone. Britain has been debating whether ministers and MPs should reveal their tax returns, after candidates for London mayor did so earlier this year. A paper briefing British MPs on the matter looked at what other countries are doing, noting the sorts of financial disclosures Indian political candidates are required to make.
Of course, India too could look at other countries for ideas about what to do. In Sweden and Norway, the briefing paper said, the tax information of all citizens is made public.
In the United States, wealthy Republican presidential candidate Mitt Romney was pressed by political rivals to publish his tax returns and eventually agreed in January to reveal his tax filings for 2010 and estimates for 2011, although it’s common for U.S. political candidates to release several years of tax returns. President Barack Obama’s campaign is urging Mr. Romney to reveal returns going back several years.
The contents of Mr. Romney’s tax returns also proved controversial — he reported $21.7 million in income and paid nearly $3 million in taxes that year, making for a tax rate of about 14%, much less than the 35% tax rate that high-earning salaried professionals attract.
The list of MPs covered under the ADR’s February 22, 2010, information request:
Bahujan Samaj Party
Shafiqur Rahman Barq
Bharatiya Janata Party
Navjot Singh Sidhu
Biju Janata Dal
Communist Party of India (Marxist)
Baju Ban Riyan
Dravida Munnetra Kazhagam
Indian National Congress
Beni Prasad Verma
Nationalist Congress Party
Sharadchandra Govindrao Pawar
Rashtriya Janata Dal
Lalu Prasad Yadav
Rashtriya Lok Dal
Shiromani Akali Dal
Paramjit Kaur Gulshan
Shivaji Adhalrao Patil