A Bill to amend the Lokpal and Lokayuktas Act, 2013 was introduced and passed in Lok Sabha yesterday. The Bill makes amendments in relation to the declaration of assets of public servants, and will apply retrospectively. Declaration of assets under the Lokpal Act, 2013 The Lokpal Act, 2013 provides for a mechanism to inquire into corruption related allegations against public servants. The Act defines public servants to include the Prime Minister, Union Ministers, Members of Parliament, central government and Public Sector Undertakings employees, and trustees and officials of NGOs that receive foreign contribution above Rs 10 lakhs a year, and those getting a certain amount of government funding. [A June 2016 notification set this amount at Rs. 1 crore.] The Lokpal Act mandates public servants to declare their assets and liabilities, and that of their spouses and dependent children. Such declarations must be filed by July 31st every year. They must also be published on the website of the Ministry by August 31st. 2014 amendments proposed to the Lokpal Act In December 2014, a Bill to amend the 2013 Act was introduced in Lok Sabha. Among other things, the Bill sought to modify the provision related to declaration of assets by public servants. The Bill required that the public servant’s declaration contain information of all his assets, including: (i) movable and immovable property owned, inherited, acquired, or held on lease in his or another’s name; and (ii) debts and liabilities incurred directly or indirectly by him. The Bill also said that declaration requirements for public servants under the Representation of the People Act, 1951 (for MPs), All India Services Act, 1951 (for senior civil servants), etc. would also apply. The Standing Committee that examined this Bill, in 2015, had recommended that the public servants should declare the assets and liabilities to their Competent Authority. For example, for an MP, the competent authority would be the Speaker of Lok Sabha or Chairman of Rajya Sabha. Such declarations should then be forwarded to the Lokpal to keep in a fiduciary capacity. Both these authorities would be competent to review the returns filed by the public servants. In light of such double scrutiny, the Committee recommended that public disclosure of such assets and liabilities would not be necessary. Further, the Committee also noted that family members of public servants are not obliged to disclose assets acquired through their own income. These disclosures may be in violation of Article 21 (right to privacy) or 14 (right to equality) of the Constitution. However, the public servant must declare assets and liabilities of his dependents, and those acquired by him in the name of another. This Bill is currently pending in Lok Sabha. The 2016 Bill and its position on declaration of assets The Amendment Bill, that was introduced and passed by Lok Sabha yesterday, replaces the provision under the Lokpal Act, 2013 related to the declaration of assets and liabilities by public servants. While the new provision also mandates public servants to declare their assets and liabilities, it does not specify the manner of such declaration. The Bill states that the form and manner of such declarations to be made by public servants will be prescribed by the central government. Therefore, if passed by Parliament, the effect of the amendments will be the following:
These implications will apply only if the Bill is passed by Rajya Sabha and gets the President’s assent before July 31, 2016.
The Ministry of Communications and Information Technology released three draft policies on telecommunications, information technology and electronics. The Ministry has invited comments on the draft policies, which may be sent to epolicy2011@mit.gov.in. These policies have the common goal of increasing revenues and increasing global market share. However, the policies may be incompatible with the Direct Taxes Code Bill, 2010 (DTC) and India’s international obligations under the General Agreement on Tariff and Trade (GATT). Below we discuss these policies within the scope of the GATT and the DTC. The draft National Information Technology Policy, 2011 aims to formulate a fiscal structure to attract investment in the IT industry in tier II and III cities. It also seeks to prepare SMEs for a competitive environment by providing fiscal benefits. Similarly, the draft National Electronics Policy provides for fiscal incentives in manufacturing on account of infrastructure gaps relating to power, transportation etc. and to mitigate the relatively high cost of finance. The draft policy also provides preferential market access for domestically manufactured or designed electronic products including mobile devices and SIM cards. The draft National Telecom Policy seeks to provide fiscal incentives required by indigenous manufacturers of telecom products and R&D institutions. The theme of the DTC was to remove distortions arising from incentives. The detailed note annexed to the Bill states that “tax incentives are inefficient, distorting, iniquitous, impose greater compliance burden on the tax payer and on the administration, result in loss of revenue, create special interest groups, add to the complexity of the tax laws, and encourage tax avoidance and rent seeking behaviour.” It further notes that the Parliamentary Standing Committee on finance had recommended removal of exemptions other than in exceptional cases. As per the Department of Revenue, tax holidays should only be given in businesses with extremely high risks, lumpy investments and lengthy gestation periods. The DTC also removes location-based incentives as these “lead to diversion of resources to areas where there is no comparative advantage”. These also lead to tax evasion and avoidance, and huge administrative costs. The proposals to provide fiscal incentives in all three draft policies contradict the direction of the direct tax reforms. Article 3 of GATT provides that foreign products should be accorded the same treatment accorded to similar domestic products in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution and use. The provisions in the draft electronics policy to secure preferential market access to products manufactured in India may contravene this Article. In granting such fiscal and trade incentives, the policies may be contrary to the approach adopted in the DTC and India’s obligations under the GATT. These draft policies will have to be reconciled with tax reforms and trade obligations.
