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Rediff Business Interview/Bibudhendra Mishra

'Bombay pays 35 per cent of the total tax. Despite all shortfalls. Despite industrial slowdowns'

Bibudhendra Mishra has just taken charge. As Bombay's chief income tax commissioner. The boss of Ayakar Bhavan, headquarters of the income tax department in Bombay. At a time when revenues are sliding and the city is about to lose its pre-eminence as India's commercial capital. With the stock market in deep slumber, property prices nose diving, the bullion and diamond markets in shambles, industry going through an endless period of recession. Adding to its woes are the new extortion rackets and rising white collar crime. In such a dismal environment, how do tax authorities hope to meet their increasing revenue targets? Pritish Nandy met Mishra to find out.

Why is Bombay losing its pre-eminence as India's highest income tax paying city?

It hasn't exactly lost it but, yes, there are a few problems.

Are you satisfied with the targets you have set yourself for the year? Do you expect to meet them?

The targets are set by a complicated process. We, in the department, do not set them. They are set by the economic affairs people and other experts to the government.

Do you find them realistic? Achievable?

Well, from one point of view, I would say they are not as accurate as the ground level reality is. This is because of various reasons. The assumptions, while making the budget, are not known to us in the field. They may be (based on) forecasts regarding the GDP growth, sectoral growth, industries growth, the service sector growth. The parameters are not known to us. We only get a hint in the Economic Survey presented by the finance minister. The target is given to us. As a percentage over the previous year's budget. Whether we have achieved that budget or not is not taken into consideration. So if we have failed last year?.

It does not mean you will get a lower, most realistic target this year?

No. In fact, it is jacked up much higher. This is exactly what happened this year in Bombay.

Why did you fail to meet your revenue target last year?

We made an analysis of the top 600 companies in Bombay. We saw that, barring the financial sector, that is the banks and institutions like UTI, GIC, IDBI, ICICI, the rest have not been performing well. All the manufacturing sectors, except for (say) cosmetics, which is not exactly a large sector, have shown a very downward trend.

Most of our collections come from advance tax, which is an estimate of tax based on the current estimate of income by the tax payer himself. Plus withholding tax, which is tax deducted at source. We add another 10 to 15 per cent through our efforts. The other day we were talking to the Canadian minister and his officers. There, it appears, self assessment brings in 95 per cent of the revenue. Departmental efforts add only 5 per cent. So we are not doing badly out here, as some people think.

In fact, in Bombay, departmental effort has done very well. But the self assessment tax -- as in Delhi and Calcutta -- has not met its target. Simply because the top companies, apart from (as I said) the financial sector, have not done well at all.

What does this year look like?

I am optimistic. After such a long period of under performance, the Indian economy has to look up at some stage. I am hoping it will happen this year.

But there are no signs of this as yet?

But I continue to be optimistic, Mr Nandy. We have passed through so much stress and strain for the last couple of years. The time has probably come for long term decision making which was postponed from time to time. But if it is again a bad year, we are stuck?

Can you scale down targets midterm if you find the economy continuing to be in the dumps?

No, we have no way of doing this. If we have a shortfall, deficits take place.

There was a huge shortfall last year?

That was in comparison to the budgets set. But if you take the VDIS taxes into account, we did very well. However, we are excluding (for the sake of calculations) the VDIS figures. But if you add them, Bombay was unquestionably No 1.

The exact figures?

Rs 400 billion. Of this, Bombay contributes over Rs 120 billion.

Including the VDIS?

Including the VDIS, the figure comes to Rs 146.6 billion. That is, Bombay pays over 35 to 37 per cent of the total tax revenues of India. Despite all shortfalls. Despite all industrial slowdowns. That is what makes us No 1.

What about new assessees? The ones you picked up through the four criteria chosen -- cars, mobile phones, flats, foreign travel?

I see that as a continuous exercise. Because these are the external signs of affluence. Independently as well as collectively, they give us a true picture of those who earn and spend the most in our society. Over the last two months, we have got a list of all those who come in this category. As a result, we have now got 11,000 fresh assessess filing their returns based on these four criteria -- apart from the VDIS lot. We have also got more than 200,000 returns from new assessees. Adding almost 25 per cent to the list of tax payers in Bombay. This proves that such measures have a snowballing effect in the long term.

More important, we are onto a massive computerisation programme. The government, the board and the secretary -- particularly N K Singh -- have taken a lot of interest in this. The information we have already collected will now emerge as...

A strategic data base for the future?

Yes. This will provide us a clear and accurate picture of all transactions.

But given your current level of security awareness it will also render your tax payers vulnerable to hackers and extortionists. Your data banks can be easily unlocked by computer criminals and misused for the wrong purposes. Don't you think that by compiling such data you are actually helping criminals to get all their information from one single source which they can either subvert or break into?

You are absolutely justified in having such fears. In fact, all countries of the world face the same problem and that is why they have evolved a security system to protect their data base. The Internal Revenue Office in the US and Canada, for instance have mind boggling information about their tax payers on their computer systems. But you cannot get anything out of them by any process whatsoever. I can assure you that we will also have such strong and safe security systems in place.

You will have, you say. That is a promise for the future. But what about today? What about the data you are collecting and filing away? Who will protect that from criminals?

We are extremely cautious. Only the seniormost officers have access to it.

There were rumours that even the VDIS information was selectively leaked to extortionists?

My predecessor firmly and officially denied that. It was just a mischievous rumour. Even the police authorities confirmed that.

But it is such mischievous rumours that translate into reality. The idea catches on.

The data is kept at the highest level in our system and no one but the senior most officers have access to it.

But does that ensure absolute secrecy? That is the question. Most nations are waking up to the danger of collecting too much information about their citizens and keeping this available at a single, vulnerable point for criminals to pick up. India does not have to repeat the mistakes others have.

It is a danger, yes. But we are determined to put in place the finest security systems available so that it does not happen out here. You will then realise that such fears are somewhat misplaced. We have no option but to prepare ourselves for tomorrow.

EARLIER PRITISH NANDY INTERVIEWS:
V M Muthuramalingam, chief commissioner of income tax, Bombay
N K Singh, revenue secretary, government of India

Interviews