Every honest taxpayer expects a fair Government to revise tax slabs and lower tax rates. Until now, dishonest people managed to dodge taxes by exploiting the loopholes in the system. Going forward, they would find it difficult to manage their black money and escape from the eye of the taxman—thanks to demonetisation. At least, India’s Finance Minister, Mr Arun Jaitley believes so. Recently, speaking with the media he said, “Future transactions would be substantially digital and once they are substantially digital they get caught in the tax net." 

The Government is hopeful the digital drive will not only help boost its revenue but would also ensure that a significant chunk of cash stays within the system—a pre-requisite to low-cost funding.  Besides, to deal in cash, mentioning the Permanent Account Number (PAN) would become prevalent and the roll out of GST would further discourage cash transactions in the economy. These factors, according to the FM, would lead to lower corruption and higher reforms.

Is this only positive thinking, or there is any silent message for taxpayers that the tax rates will drop in future?

Well only time can tell; but for now, it is nothing more than mere speculation. It seems the Government is trying to hide its failure in the implementation of demonetisation which is why it's painting such a rosy picture.

How can it turn a blind eye to some blatant instances of corruption that have happened soon after it scrapped high denomination notes? The Police have taken RBI officials into custody for facilitating illegal currency exchange. Many bank officials have been facing similar charges. Government employees have been caught red-handed accepting bribes even at a time when there is an inadequate supply of cash. Rs 2,000 notes would facilitate corruption and not prohibit bad practices once the money supply improves.

The digital payment campaign too appears a last minute arrangement. If not, then that too was planned badly. In that case, only the Government knows how a digital payment campaign can succeed when India has abysmally low penetration of debit and credit cards. It is better not talk about digital wallets whose use is mostly confined to the educated urban spenders. 
MPs and MLAs have been spending crores of Rupees on weddings and private parties, at a time when the other citizens are standing hours in queues just to get a few notes of their hard-earned money. Is it a case of total disdain or a new-norm?

Still, let’s believe what Mr Jaitley says and then expect a front-loaded reduction in tax rates. If the Government waits until actual tax collections go up, it will prove two things:

1. The Government is not confident that demonetisation would result in greater transparency, minimal corruption and buoyancy of tax revenues.  
2. The Government is making honest taxpayers pay a very high cost with demonetisation at a time when all political parties are shamelessly accepting donations below Rs 20,000 in cash.

All eyes will now be on Mr Jaitley, as he announces the Union Budget 2017-18 on February 1, 2016.

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