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Why is everyone talking about 'Tax Terrorism' these days, what exactly is it, explained

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New Delhi, Aug 5: Taking a strong exception to alleged harassment by the Income Tax Department and recent raids on some of the Congress leaders, Rahul Gandhi, the former president of the grand old party, on Monday said that all this was being done to "meet India's revenue shortfall".

Gandhi also shared media reports about "tax terrorism" on his official Twitter handle. The suicide of Cafe Coffee Day founder VG Siddharha prompted several eminent businessmen have been vocal about tax terrorism. Siddhartha had alleged harassment from lenders and tax authorities in a letter purportedly written by him. Many speculate that tremendous stress due to increasing liabilities in business and repeated warnings by the IT Department may have driven CCD founder to end his life.

Why is everyone talking about Tax Terrorism these days, what exactly is it, explained

Congress leader Rahul Gandhi on Monday hit out at the Modi government, alleging that the Income Tax Department is "running amok" in a bid to meet India's revenue shortfall.

"The FM (Nirmala Sitharaman) said in her budget speech that an elephant should take just 2 pounds of rice & not trample the entire paddy field," Gandhi said in a tweet.

"Meanwhile, the IT dept elephant is running amok in a bid to meet India's revenue shortfall," he said.

Ever since CCD founder VG Siddhartha passed away, TV Mohandas Pai, former CFO on Infosys and chairman of Manipal Global Education) has become vocal about tax harassment.Some reports even quoted Pai as saying that the IT department officers have a target to achieve. He has also reportedly said that officers were helpless as the Central Board of Direct Taxes continuously puts pressure on them and threaten to transfer them on failing to meet the set target.

On July 30, The Income Tax Department has attached Rs 254 crore worth of "benami" equity of Madhya Pradesh Chief Minister Kamal Nath's nephew Ratul Puri which he is stated to have allegedly received from a suspect in the VVIP chopper scam via shell companies. A week before this, the Income-Tax Department searched several premises linked to Congress leader Kuldeep Bishnoi in Haryana and Delhi on charges of alleged tax evasion.

What exactly is "Tax Terrorism":

Last week, Congress alleged that there was "tax terrorism" in the country and that the Modi government was misusing Income Tax, Enforcement Directorate and other agencies to create fear in the minds of politicians and businessmen.

Tax Terrorism collectively refers to alleged unhealthy practices followed by the tax department in order to meet its revenue collection targets.

According to an Economic Times report, there have been instances wherein the IT Department had issued demand notices to assessees upon which the assessees either failed to deposit 20% notice amount before challenging it, as required by the law; or they didn't respond to the notice at all. The Department then took a tough stance against them and said to have written to their bankers and debtors to recover dues.

The I-T Department may even write to an individual's debtors asking them to deposit the amount they owe in the government account instead of paying back your debt, equitymaster.com reported.

Further more, there have reportedly been instances of raising large unjustified tax demands followed up with aggressive recovery procedures, including coercive methods.

Such actions including many other things that IT department resorts to results in large funds of taxpayers being blocked in pending tax refunds. These funds could have otherwise been put to productive use by businesses. The business eventually suffers as were left lying with the government.

A major promise made by the BJP in 2014 was to stop tax terrorism. Former finance ministerArun Jaitley had proclaimed, before the 2014 election, that tax terrorism is the biggest threat to India and he was going to stop it. The party's 2014 manifesto stated, "UPA Government has unleashed 'tax terrorism' and 'uncertainty', which not only creates anxiety amongst the business class and negatively impacts the investment climate, but also dents the image of the country. We will provide a non-adversarial and conducive tax environment, overhaul the dispute resolution mechanisms, rationalisation and simplification of the tax regime which is currently repulsive for honest tax payers."

In an article by former Infosys CFO Mohandas Pai published in Financial Express says a review of NDA II (2014-19) indicates that it has been unable to fulfil these promises.

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