Revisit the gift tax

Prince Charles and Camilla Parker-Bowles got a variety of gifts during 2007. Among them, there were expensive watches, lots of jewellery, model yachts, a stallion, carpets, and many more mundane items. The royal couple is allowed to use the gifts, but they belong to the state and therefore are the property of the government. Do the gifts add to the royal wealth or income? The answer is no. They may add to royal pleasure, but that is about it.

Those points are relevant when considering the Mayawati case. The UP chief minister was booked for owning assets running to dozens of crores of rupees, and in fact reporting a sharp increase in her wealth, which was clearly out of line with her known sources of income. She argued that the wealth was not from her income but from gifts that she received from her political supporters and fans. On the face of it, this is hard to imagine. India has had many popular political leaders, many of them at least as popular as Ms Mayawati is in Uttar Pradesh. Yet, none of them has been showered with gifts in cash on the scale reported by her. Especially since her support base comprises mostly the depressed classes and poor people, overflowing generosity is even less credible. And if one considers the number of potential gift-givers, who would be from a fraction of the 30 million families in the state, the numbers do not seem to add up.

Nevertheless, the fact is that the income tax appellate tribunal has now given its verdict, in which the tribunal accepts the Mayawati version and decrees therefore that there has been no tax evasion. It is not clear whether the tribunal went into the records of the gifts said to have been received "" on which days and on what occasions, how much in each case, in cash or by cheque, how were the records kept and who kept them, where was the money stored, do the bank records match the sequence of gift-taking recorded, etc. Such a rudimentary set of questions would establish whether the gift story is credible, and it must be assumed that the senior income tax officers who sit on an appellate tribunal are capable of asking such questions in order to ascertain the facts. However, since tax matters are kept out of the purview of the law on right to information, the public may never know whether such questioning was indeed done before the decision was arrived at.

Given the improbability of what has been declared to be true, the opposition has suspected a political deal between the Congress and Ms Mayawati, especially since a clean chit has also been given in the Taj Corridor case. That may or may not be true. What the government has to do is find a way to deal with a situation in which many other politicians could use the Mayawati plea when reporting a sudden increase in wealth. If anyone still harbours any hope of cleaning up the functioning of India's political parties and their leaders, that hope would effectively be killed. What the government needs to do is to revisit the gift tax and tax the total value of gifts received in a year if the figure crosses the existing exemption floor (per gift) of Rs 25,000. Without this change, politicians can drive a coach and four through the tax system.