India has innumerable problems and I doubt if the readers of this magazine need to be reminded of all of them. But in the recent years, especially the hue and cry over raising prices of petroleum products and the proposed amendments to the pathbreaking RTI Act led me to believe that a serious start needs to be made in bringing in more transparency, productivity and accountability in all public arena and those who are performing their duties need to be rewarded the most. This paper tries to bring in one solution in the process Clean-up being attempted by various NGOs and Civil Society organizations.
India is a land of a billion people. How many of us pay income tax? Apparently less than a million and a half. Most of the corporate assessees would be headed by individuals who are personal income tax payers. So you can say, that the contributions of 1.5% of the population make up Rs. XX crores that is XX % of the direct taxes collected which is XX% of the total collections.
When the prices of petrol and diesel were raised in June 2006, I received mails from round the country calling for protests in various ways. It was also highlighted that petrol cost less than Twenty Pakistani Rupees in our neighbouring country. Without getting into the politics of whether the Indian economy should benchmark itself against the Pakistani, I raised just one issue. Assuming most of the money collected through the duties, that make up 50% of the petrol price we pay, was spent on subsidies and other “beneficial” projects, and the duties were reduced or withdrawn, where will the difference be made up from? Most probably the same cash cow - the honest income tax payer who earns by cheque, pays by credit card therefore contributes the most towards service tax, sales tax, education cess and the works. At least the duties on petro products meant that the guy who imported his Ferrari without paying the duties or always buys an Esteem an year by paying cash from a friend who uses his car for two months or who says his plot in Vasant Vihar has bad Vaastu and hence was sold for only half the price that the market thinks it should have got, all give something towards the government kitty.
But the fact remains that despite paying taxes honestly, most of us do not feel proud of doing so simply because we don’t see it being used honestly or productively. The RTI Act was a move towards trying to ensure that the money is deployed as it was said it would be. Yet, it still does not give the tax payers a say in where they want their money spent. Sure we would not know the nitty gritties of the strategic plan to make India a super power, but in the twenty years that I have heard of the plan I still don’t see it in action. Some of the European countries like Italy give the tax payers an option of saying where they would like a small portion of their taxes deployed –renovations of heritage sites, museums etc. I would like to take this further to incorporate several existing practices to develop a model that would bring in change in India.
We have all been paying an Education Cess on all taxes for over three years now. The cess collected each year is upto Rs. XX crores. But we are also told that the Finance Ministry, never really gave the money over to the Education Ministry and is simply sitting on it. My question was: who decided that education was the most important thing for which a cess needed to be collected? Why was it felt that education was more important than potable water or health? What were the objectives which the cess was to fund? Where does the ministry stand vis-à-vis those objectives today? As the tax payer who gave the cess, I have no clue. But as a tax payer I would like to be involved.
I am not calling for the withdrawal of the cess. I would to extend the same into a more integrative practice, that will encourage participation of all parties involved.
The basic principles of the model are as below:
Where the cess to be collected will be deployed is to be decided not by the government in power but by the tax payer. Each year when (s)he files his return (or with the December Quarter Advance Tax), (s)he sends in a vote saying where the money should be deployed in April next year.
The options for where the money should be deployed are generated by each of the ministries. So the Power Secretary develops a plan saying I have this great idea, that needs so much funds and this is my plan of action for using the funds over the next five years with these annual milestones. Similarly the Health Secretary, the Education Secretary and so on. (Mind you not the politician in charge but the Administrator in charge is to be responsible for the project). Each of these projects is publicized where a tax payer can easily access all details and compare them and analyse if these budgets and targets are plausible and honest.
After the tax payers have voted in their choices, the two projects that are voted most are to be funded by the cess. If the projects cost more than the cess collected, the budget has to allocate the sum required. If the cess collected is in excess, the sum is to be voted on by the tax payer in the next year for deployment. The two Secretaries whose projects have been chosen, cannot be changed from their position for the tenure of the project, even if they are due to retire.
At the end of year one, both projects are assessed by an independent team of consultants drawn from a pool of intellectuals and auditors to be listed right in the beginning of the year whose presence in the pool can also be voted/nominated by the tax payers.
The progress report for both projects is evaluated and published publicly. The evaluation is against the specified milestones and will have no room for subjectivity.
If a project has failed to achieve its goals by over 20% the project is scrapped and the Secretary who presented the plan, is to resign from the service he represents. The “Up or Out” policy works beautifully in the private consulting industry and it should be brought in at the higher levels of the public administration too. An administrator who does not know what (s)he can do, does not do what (s)he says (s)he will and cannot get the work done, is clearly not fit to be in the position held or of similar nature.
If the projects meet their targets, they are to be continued to be funded by the cess and the budgetary allocation for the gap (if any). The Secretary incharge stays for the duration of the project and is allowed 1% of the project cost for the next year as a bonus to the team handling the project, coming out of the cess.
If the projects are exceeding their targets by over 20%, the government will fund these projects completely with annual reports being submitted to the tax payer on the status and new projects will be funded by the cess. The team also gets 2% of the project cost for the year as bonus. This will ensure that projects, that were great ideas and should have been supported by the budget, will now be supported by the same, and the cess used to identify other great ideas.
For a country where 500 million votes are counted within a week, I am sure counting the votes on the cess from 1.5 million tax payers will be no task especially since there are plans to insist on electronic forms.
This will give the tax payers a chance to push for their concerns, needs and priorities and simultaneously give the administrator a chance to articulate ideas that he/she may have but have been suppressed by the powers that be.
In time the discretionary tax contribution should be increased and the black box contribution that one has no clue where it goes reduced. . It can also be extended at the state level to the professional tax collected etc. With time even state secretaries, department heads or public sector companies could pitch for the funds.
As performance is rewarded publicly, it will hopefully get administrators to pitch their best ideas and actually vie for more than their political masters blessings. An officially available bonus hopefully will reduce their passion for making money from projects.
