Modi Government More Responsive to Criticism: Arvind Virmani

The Narendra Modi government that completes a year in office is more responsive to criticism than the earlier government, former chief economic advisor Arvind Virmani told NDTV.

"This current government compared to the previous one is more responsive to criticism when they make a bad move which they haven't been able to avoid, they are relatively quicker to respond to genuine criticism of these moves of which the tax issues are an important component," Mr Virmani said. (Watch)

A controversial 14-page-long Income Tax Return (ITR) form that sought bank details and foreign trip disclosures was released last month and came under heavy criticism, which prompted Finance Minister Arun Jaitley to order a review. Mr Jaitley has assured taxpayers that very soon a simplified ITR form would be revealed.

The 14-page form turned controversial as the Supreme Court-appointed SIT or special investigations team asked for the inclusion of foreign travel details in the form in a bid to curb the black money menace.

According to sources, the Revenue Department made the addition without the minister's consent. The 14-page-long form was notified by the Central Board of Direct Taxes (CBDT).  Mr Jaitley was on an official foreign trip when the controversial order was passed.

"Fortunately I think the response to that (ITR issue) was reasonably quick and we hope as the Finance Minister has said this kind of mistake would be used as an opportunity to make things actually simpler than they were a year ago.

MAT Issue
The controversial minimum alternate tax or MAT is an issue which the year-old government is yet to get a grip on, Mr Virmani said.

"This is the issue of tax terrorism which was a major issue overall which related to in fact all three aspects both in terms of signalling to foreign investors etc. and in terms of macro and in terms of structure - simplification of taxes there has been a lot of back and forth. It's like one step forward, one step backwards.

"And unfortunately it does not objectively appear from outside that they have really been able to get a good grip on that issue," he said.

Earlier this week, in a move to pacify investors, the Income Tax Department said that it will hold off from issuing new demands to foreign investors for payment of MAT, and will take no coercive action to pursue claims that have already been filed.

Seen as big U-turn by the government, it comes after continued sell-off in the financial markets by FIIs or foreign institutional investors since April on the apprehension that the government will impose a 20 per cent MAT on profits earned by them.

The government has already said it will not levy MAT on capital gains made by FIIs from this fiscal year. But it said tax demands on past incomes could only be reversed by the Supreme Court.