New Delhi: The Economic Survey 2018-19 tabled in Parliament on Thursday has suggested ways to bring about behavioural changes to widen the tax net in India.
The document listed out methods such as linking religion to tax evasion, rewarding top taxpayers by naming roads, building and trains after them, and expediting boarding privileges at airports, fast-lane privileges on roads and toll booths, special “diplomatic” type lanes at immigration, among others.
The document noted that in Hinduism, non-payment of debts is a sin and also a crime. The scriptures ordain that if a person’s debts are not paid and he dies in a state of indebtedness, his soul may have to face evil consequences.
The Economic Survey quoted Hinduism’s doctrine of pious obligation and read, “Therefore, it is the duty of his children to save him from such evil consequences. This duty or obligation of a child to repay the debts of the deceased parent is rested upon a special doctrine.”
Further reinstating the need to link religion with tax evasion, the annual document read, “Under Islam, Prophet Muhammad advocated – Allaahummainnia’oodhibika min al-ma’thamwa’lmaghram (O Allaah, I seek refuge with You from sin and heavy debt). A person cannot enter Paradise until his debt is paid off. All of his wealth could be used to pay the debt and if it is insufficient then one or more heirs of the deceased could voluntarily pay for him.”
The Economic Survey also quoted from the Bible. “The Bible says, ‘Let no debt remain outstanding except the continuing debt to love one another - Romans 13:8’ and ‘The wicked borrows and does not repay, but the righteous shows mercy and gives -Psalm 37:21’,” it noted.
Thus, the document read, the repayment of debt in one’s own life is prescribed as necessary by scriptures across religions. “Given the importance of religion in the Indian culture, the principles of behavioural economics need to be combined with this “spiritual/religious norm” to reduce tax evasion and wilful default in the country,” it read.
In order to incentivise top taxpayers, the Economic Survey suggested the following ways:
- Signboards showing “tax money at work” in constructions projects in a panchayat/ district explicitly convey to citizens that their tax money is used in valuable public goods, thereby lowering perceptions of vertical unfairness.
- Top 10 highest taxpayers within a district can be highlighted and accorded due recognition. This may take the form of expedited boarding privileges at airports, fast-lane privileges on roads and toll booths, special “diplomatic” type lanes at immigration.
- Further, the highest taxpayers over a decade could be recognised by naming important buildings, monuments, roads, trains, initiatives, schools and universities, hospitals and airports in their name.
- Citizens perceive vertical fairness to be low if they find their tax payments being squandered in wasteful public expenditure or by corruption.
- Perceptions of horizontal fairness suffer when the employee class is forced to contribute disproportionately to income taxes while the class of self-employed gets away paying minimal taxes.
- Automatic deduction of tax and directing all or portion of refunds into savings accounts can be used to encourage savings, including retirement savings.
- Sending messages to individuals suggesting that not declaring taxes is a deliberate and intentional choice on their part can help them overcome status quo bias and improve compliance.
- Filing of tax forms even for zero payment of tax. Removing barriers to filing taxes - procrastination, hassle of filling forms, or failing to understand the terms - can improve compliance.
- Providing information about peer behaviour can make taxpayers adjust their reported income. Messages in the form of moral appeals to taxpayers regarding payment of taxes may have limited effects. Tax amnesties might reduce tax compliance if taxpayers perceive amnesties as unfair. Amnesties can decrease the government’s credibility and the taxpayers’ intrinsic motivation to comply by setting the incorrect social norm.
- Public shaming of individuals who don’t pay taxes can reduce non-compliance if they are reintegrated immediately. However, persistent public shaming can be detrimental for compliance because of stigmatisation effects. If cheaters feel that the probability of their detection has increased, voluntary disclosure programs for tax payments can increase tax evasion incidence as these programs may offer the possibility to avoid strict punishments.