BackEPF roll-back no exception, budget proposals have been retracted even in the past
This is not the first and probably won't be the last time that a proposal tabled during the budget has had to be withdrawn owing to its unpopularity
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New Delhi: Two days after he proposed a tax on withdrawal from the Employees’ Provident Fund (EPF) contributions in his budget speech, Finance minister Arun Jaitley had to clarify that a review will be considered. The outrage by the salaried class, which even resulted in a Twitter trend, is reportedly what caused the re-think. However, this is not the first and probably won’t be the last time that a proposal tabled during the budget has had to be withdrawn owing to its unpopularity.
Finance ministers over the years, be it Manmohan Singh or Yashwant Sinha and even President Pranab Mukherjee, have had to roll back proposals. Whether it was increase in fertilizer prices, levy of income-tax on gifts received or a proposal to privatize Air India, all these schemes have found themselves binned within days of being proposed.
In 2012, now President Pranab Mukherjee had introduced the general anti-avoidance or GAAR provision in the budget. GAAR sought to empower the tax department to invalidate transactions that have been undertaken to deliberately avoid paying tax. However, following widespread protests from foreign investors, the government announced deferring the tax provision by a year. It was subsequently again deferred by successive finance ministers and will now be implemented from 1 April 2017.
In 2015, the government had to withdraw a proposal in Finance Bill 2015 that sought to take away the power of regulation of the government bond market from the Reserve Bank of India (RBI). It also had to delete provisions relating to setting up of the public debt management agency from the finance bill.
However, when it came to roll backs, perhaps no one had it as bad as Yashwant Sinha, who was the National Democratic Alliance’s (NDA) finance minister from 1998 to 2002, and was also sometimes referred to as the roll-back minister. Sinha’s proposals like a 5% service tax and price hike of an LPG cylinder by ₹ 40 were rolled back. The price of an LPG cylinder was changed by ₹ 20.
But are these roll-backs really advisable? Under pressure from opposition and the voting public, do governments actually end up revoking decisions meant to help in the long run? Political analyst Jai Murg does not think so. According to him, these are all political decisions. In fact, “many of these are meant to be rolled back. It is meant to let the opposition know that they have been taken into confidence, it helps to give the impression of a collaborative democracy", he said.
But sometimes it is not about protests from the opposition but rather investors and the society, GAAR being a prime example.
As #rollbackEPF trended on twitter following the 2016 budget, the power of social media in shaping government decisions also came into play. “The decision to review it could be a response to electoral requirement as it would have created very strong resentment in middle and upper middle classes. But the budget does signal a shift because the rural population that has not been remembered for the past two years, now found itself at centre stage," said Amitabh Kundu, a former member of the National Statistical Commission.
Jaitley had defended his proposal, saying it was an effort to move to a pensioned society. But the question that remains is whether a country needs a popular budget or a tough one.
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