he feels on top of the world in having supported the finance minister in his tax reform goals. Why are you leaving your post as adviser to the finance minister?
I have been in this position for well over three years. I have advised and assisted the finance minister on tax reforms in three Union budgets. We have also carried out fundamental tax administration reforms through information technology.
Revenue productivity of the tax system is at a historic high and revenue growth has also been most impressive in any international comparison. The FM (finance minister) is at a commanding height over taxation. Now it should suffice to carry on with what we have established and obviate any erosion. This is the right time for me to demit office.
Income tax revenue is very high; but what about excise? Are you satisfied with that?
Don't look at excises separately. They are a part of the indirect tax structure. Service tax revenue productivity has been extremely high. Customs revenue growth is also robust despite steady duty cuts.
Excise on imports is reported under Customs duties for statistical purposes. Put together, indirect tax revenue is also demonstrating a steady growth. Also, please remember that, with economic growth, direct tax revenue tends to overtake indirect tax revenue. This is occuring in India as well.
You have been an integral part of state-level tax reform also. Now...?
(The) finance minister asked me to take responsibility on the VAT front. The Empowered Committee (EC) of State Finance Ministers for VAT invited me as a permanent invitee, and it was a pleasure to work with all of them on a common professional platform, while hailing from diverse political backgrounds.
It was instructive how the chairman exercises patience while his colleague finance ministers recognise policy rather than politics to reach consensus in decision-making. The goodwill I have been able to establish with them is most satisfying. And it was a good feeling when states, leading the light, or through cajoling, or in hindsight, introduced VAT group by group.
Now the reform process for indirect taxation has gone up one notch further. India is poised to debate, discuss and introduce a Goods and Services Tax on April 1, 2010. I was co-convenor of the working group on GST, and we have already submitted a report to the EC.
The EC has endorsed the report, and it is expected that a revised version will be sent to the Union finance minister soon. So we are already on the road map to a dual GST. It is quite satisfying to feel that, with gentle pushes based on a well defined strategy, the process is on the march. Again, it is a good feeling.
What are the lessons you have learnt from your experience?
Many lessons. I have learnt how policy is made, whether in the context of delegations from industry, chambers, lawyers, politicians or line ministries. Participating in entities set up at the highest levels of the government, such as empowered groups of ministers, the prime minister's TERC (Trade and Economic Relations Committee), the National Manufacturing Competitiveness Council, the Committee of Secretaries "" has been an eye opener, and involving.
Perhaps most intensive were the pre-Budget policy formulations with the finance minister and rounds of discussions with the prime minister. These were terrific, especially when I felt I could help convert my beliefs into policy through intensive analysis and discussion.
Some people have commented that you got too involved in daily decision-making and that, given your expertise, you should have involved yourself more in tax reforms.
I have involved myself in all matters of tax policy! But I do not want to downgrade file examination, paradoxical as it may sound. At the beginning, I wondered if I should get into it, but soon realised that, unless I understood the policy-making process in its entirety and in depth, thereby getting my feet muddied, I would remain in the periphery and my experience would remain incomplete if not unfulfilled.
So, over time, I found myself poring through all manner of tax issues that are thrown up on a daily basis "" double taxation avoidance agreements, international taxation, inverted duty structure affecting industry, tax evasion, tax equity matters in specific sectors, on and on "" and I enjoyed it all.
You know, when you have been able to help out a small bicycle parts manufacturer, the marginal utility from that could be higher than, say, helping resolve issues faced by colossal business houses. It has also been an eye-opener how such giants may face hiccups too, so that smoothening out creases became my forte almost!
...Like who?
Why pinpoint individual entities when I have tried to sort out matters big and small "" whatever the FM sent in my direction. It was my duty and I enjoyed it. It also gave me satisfaction and confidence in untying knots and unlocking bolts in the bureaucratic process. It taught me patience. Yes, that is it, great patience I think.
Is your departure related to any particular issues?
Let me relate two episodes to you. Vito Tanzi, my superior at the IMF, and I were working on a research paper. I gave him a tough time in discussing a point. He put on a serious face and said, "Partho, you don't criticise your boss."
Then he turned around, smiled and said, "But you are welcome to do that with a fellow researcher." What a relief that was! Seriously though, I have worked with many a finance minister over time. And in general also, you have to identify those aspects of a person with which you can work; thus, I learnt from his electric speed. We have had many relaxed, cordial exchanges. They will be with me. But, of course, one cannot agree on every matter.
The second. You know I come from a family of bureaucrats. My grandpa was Advocate General. His brothers were judge, IAS, etc. My father was in the Reserve Bank. My uncles were IAS, IPS, IAAS, etc. I broke rank from their generations.
It was fate that brought me back to it. But my father rightly said, "Partho, never confuse yourself with the chair on which you are sitting." When I eventually understood what he meant, I made it easy for myself to leave a position when I felt on top or when I was convinced it is the proper moment.
Returning to your departure, it had been announced that your tenure had been extended till September 2010. Then why are you leaving?
I am at a crossroads. I feel on top of the world in having supported the FM in his tax reform goals and helping lay the foundation for revenue productivity along international lines.
Electronic returns, third party information, computer-assisted scrutiny selection, large taxpayer units, systems integration, revenue projection models, publication of revenue foregone estimates due to exemptions and incentives with the Union Budget, analysis based tax policy formulation and day-to-day decisions "" these all are areas where I was intensely anchored and feel I have contributed or even spearheaded with the FM's support.
But is not this a sudden departure?
Not really. One does not abandon ship. I kept the FM fully informed as I approached this decision over the last months. I am forward looking. At this point, others may need my advice and assistance elsewhere.
Finally, Dr Shome, What is your next step?
I have been fortunate to get some interesting opportunities. I was bent on returning to academia to regroup, think, write, and contribute from that vantage point. But that may have to wait for some time. I think I am needed, and can contribute, more directly from the field. Thus I have accepted the position of Chief Economist, Her Majesty's Revenue and Customs (HMRC), United Kingdom.
That sounds extraordinary as an Indian?
From what I understand, I am the first Indian to have been offered that position. What is challenging for me in this new adventure is to be able to carry my prior professional experiences to a fresh environment. Yes, I am looking forward to it.
