Don't fear the taxman: Chidambaram

Seeking to dispel the belief that corruption and tough scrutiny by the tax department were responsible for the low rate of tax returns, Finance Minister P Chidambaram today said that merely 2 per cent of all the returns filed were actually scrutinised by the department.

"The fear of the taxmen should go. Ninety-eight per cent of the returns are not scrutinised. So why fear the taxmen? The remaining 2 per cent fall under the risk weighted random selection process," he said at a book release function in the Capital.

Responding to economist Gurcharan Das's observation that it was the fear of the tax department which reduced compliance, Chidambaram pointed out that in the case of services, the tax department had succeeded in registering people at an average rate of 7,000 per month last year.

This had increased to a whopping 70,000 in the month of October alone on account of government efforts to create public awareness through advertisements.

The finance minister pointed out that though the number of assessees in the service sector had gone up, the increase did not necessarily mean a higher revenue mop-up. "Of the 4 lakh assessees in the service sector, over a lakh do not pay tax," he said.

Chidambaram also said that it was incorrect to perceive that the Left parties were opposed to reforms.

"The concerns of the Left are shared by a significant segment of India. Moreover, the Left as a political party has 62 members in Parliament. So there are a large number of people enduring their views," he said, adding that he was confident the government could work with the Left and enlarge consensus on reforms.

The minister pointed out that it was at times easier to deal with known positions rather than with unknown changing positions. He underlined the fact that in a democracy one had to exercise patience and fortitude and there had to be some give and take.

Responding to another economist Surjit Bhalla's observation that the government had no business making cement, computers or condoms, Chidambaram said that while he agreed that the government's space in some areas must be restricted, the government's space in some other areas would have to be enlarged in the medium term till other players came in.

"The government has to take on onus of building roads, providing drinking water, primary education and public health. Moreover, not all public-sector units are performing badly. Units like the National Thermal Power Corporation (NTPC) are doing well. Why should we restrict its space so long as it is competitive and efficient?" he added.