Mr Prime Minister, give Indians dual nationality

Mr Prime Minister, give Indians dual nationality

By M.D. Nalapat | 21 June, 2014
Ensure a friendly tax regime with low rates and civilised methods of computation for NRIs to settle and invest in India.

As in other branches of government service, such as in the IAS or the IPS, the majority of those toiling within the Indian Revenue Service are conscientious officers, doing a fine job for their country within the limitations imposed by often defective policies. However, about 30% of IRS officers give a bad name to the rest, by seeking to enrich themselves and their friends and relatives almost as soon as they get their first posting. According to those in the service, there are officers posted in metropolitan centres who have amassed more than Rs 400 crore of assets within six to seven years of joining the service. Such officers got an assist through the elegant personage of Palaniappan Chidambaram. As did others such as Kapil Sibal, the Law Minister during UPA I and UPA II changed law after law, procedure after procedure, all this without any audible peep of protest from the BJP in either the Lok Sabha or the Rajya Sabha. Now that the damage done to civil society and to ethics in governance by such harsh laws and procedures is getting more visible, distinguished commentators who were in the UPA period silent about them are now vocal in demanding that they be rolled back. Not surprisingly, they have been joined by the Congress party in such a call, now that it is Narendra Modi and not Manmohan Singh who is in charge of the government.

Whereas during the Atal Behari Vajpayee period, income-tax officers were enjoined to behave in a civilised fashion even during raids, during the UPA period they were let loose in the manner of ravenous hounds. Raids would begin early in the morning and go on for days. During all this while, both mobile phones as well as landlines of the target individuals would be rendered dysfunctional, while they themselves or in many cases their families as well would not be permitted to leave the premises. In a world where decisions need to get taken on an instant basis to compete in the global marketplace, the best way of hobbling a business rival is to incentivise a senior officer into ordering a tax raid on that unfortunate. In several cases, valuables such as jewellery get taken away, need to be recorded or returned, while demands for bribes are openly made, with the officers aware that no mobile phone or camera capable of recording their cupidity is anywhere in the vicinity. There are bureaucrats in Delhi who have amassed hundreds of crores of rupees in cash and assets by ordering raids and then collecting protection money in the manner of underworld dons.

Time has come for India to give NRIs the option of dual passports. Such a facility has been enabled in all major economies.

All this has been made possible because the UPA ensured that the citizen has almost no legal recourse against the demands made by the tax authorities, who are empowered to claim up to ten times the tax to be paid as penalty, thereby ruining an individual financially unless he or she pays up a hefty bribe.

The nightmarish way in which the Income-Tax Department functions in India is the primary reason why there has been such a flight of capital, legal and otherwise, from the country during the UPA years. Investing in India has become a risky enterprise, not because of business reasons, but for the reason that some officer or the other eager to get his first Rs 100 crore begins to harass the taxpayer. Manmohan Singh has been distinguished from the 1992-96 period in being harsh on Indians but gentle on foreign nationals, and he has presided over a system whereby a citizen of India has become a lucrative and lawful (if such a word can be applied in such a context) target for authorities across the board.

Countries run by honest policymakers (rather than by those eager only to ensure that rules get framed as would generate copious bribes) such as the UK or Singapore have made their tax regimes friendly, so that High Net Worth people are encouraged to settle there, but in India, such people are subject to such tension that many flee. The only way to ensure that they remain, and that the millions of NRIs abroad who have vast resources of cash invest in the country of their parentage, is to ensure a friendly tax regime with low rates and civilised methods of computation and compliance, and without demanding that global income — rather than just income earned within the country — get declared.

Indeed, the time has come for India to give NRIs the option of dual passports. Such a facility has been enabled in all major economies except India. Prime Minister Modi needs to ensure that dual nationality be made an option for NRIs, and to ensure that conditions get created whereby not simply money in banks but bridges, roads and factories will get built in India from money now kept abroad. Should he do so, a double digit rate of growth will become a reality.

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