<b>A K Bhattacharya:</b> Choosing the tax implementers well

The current structure of the CBEC needs to be modified in tune with the launch of the GST regime from April 2017

With the government announcing a new tax immunity scheme in the wake of demonetisation and simultaneously readying itself to roll out the goods and services tax (GST) regime, more attention needs to be focused on the functioning of two statutory boards of the revenue department in the finance ministry — the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC). Expectations are running high. The CBDT is hopeful of securing a record level of black money disclosure under the ongoing tax immunity scheme — as much as Rs 1.5 lakh crore, more than double the amount declared in the last income disclosure scheme that ended on September 30, 2016. The CBEC, on the other hand, is working overtime to implement the GST regime by April 2017 — a task that is by far the most difficult and ambitious indirect tax reform in this country.

 

Yet, the two boards suffer from one major lacuna — frequent changes at the top. But that’s not because the government has been cutting short the tenure of those at the helm of these boards. The fact is that most of those who take charge of these boards have only a few months left before they superannuate on reaching the prescribed age of 60 years. Take the case of the current CBDT chairperson, Sushil Chandra, who was appointed in November this year and in the normal course will retire by May 2017. His predecessor, Rani Nair, had a tenure of four months during which period she rolled out the government’s ambitious income disclosure scheme that netted over Rs 67,000 crore of black money. Even her predecessor, Atulesh Jindal, had a tenure of just five months and several of his predecessors too had tenures of only a few months in the top job, two of whom served only for two-three months.  Indeed, 2016 has seen four persons occupying the position of the CBDT chairperson.

The tenures of CBEC chairpersons are slightly longer, though not of a desirable length by any standard. The current chairperson, Najib Shah, was appointed in July last year, but will demit office on superannuation by the end of March 2017, just before the GST is due to be rolled out. Two of his immediate predecessors had a shorter tenure of just eight months each. And the longest tenure any CBEC chairperson has enjoyed in the last seven years is 18 months (Praveen Mahajan between August 2012 and January 2014). What leadership can anyone provide to a board if the tenure on average ranges between eight and 18 months?

Consider also the irony of the situation. The current CBEC chief, who for the last 17 months has been trying hard to overcome the many procedural, administrative and legislative hurdles coming in the way of a countrywide GST regime, will not be there to lead the efforts to ensure a smooth roll-out of the new indirect taxes system from April 2017. In terms of taking advantage of continuity, experience and domain expertise, the departure of the current CBEC chief at a crucial juncture like this would be a significant handicap. Not that the successor to Mr Shah would fail to implement the GST system. But there is no denying that the government would lose the obvious advantages of the current CBEC chairperson remaining in charge of implementing the new tax system at least for a few more months during the early stage of its implementation. 

The current structure of the CBEC also needs to be modified in tune with the launch of the GST regime from April 2017. There are now four members of the board —  one each looking after the portfolios of administration, Budget & GST, customs & legal and central excise, service tax & information technology. With GST expected to be in place from next April, the portfolios of the four members need to be streamlined to achieve higher efficiency and effectiveness of the teams. There is now a clear need for a more expanded portfolio of GST that would subsume central excise and service tax. 

But the relatively short tenure of CBEC and CBDT chairpersons is a bigger challenge. An easy but controversial way would be to grant a minimum tenure of at least two years for those heading them. In 2005, the government decided to grant a minimum two-year tenure for as many as five posts in the Union government — defence secretary, home secretary, head of research and analysis wing, director of the intelligence bureau and director of the central bureau of investigation. Already, the cabinet secretary enjoys a tenure of about two years. So, extending the same privilege to those heading the CBEC and CBDT could be an option. 

Such a move, however, is likely to be controversial and certainly resisted by officers belonging to the Indian Administrative Services (IAS). No secretary in the finance ministry has a fixed tenure at present, though many IAS officers get to head a ministry for two years as they are empanelled for secretary-level posting at a relatively early age. In comparison, not many Indian Revenue Service (IRS) officers have more than a year left in service before they get considered for the top job in the two boards. 

A more practical way, therefore, would be to introduce a new criterion for appointing the chairpersons for the CBEC and CBDT — no officer with less than two years left in service can be considered for the top job. This might be resisted by many senior IRS officers, but it will provide a reasonably long tenure of at least two years at the head of these two statutory boards. If the country’s taxation system has to be modernised and the government does have plans to undertake many more reforms in the coming months, it is important to first put in place a stable team of implementers.