EPF tax a fallout of the UPA regime: Pawan Kumar

'When a bureaucrat joins the government he thinks, "my minister is here for five years, but I am going to be here for 35 years; so let me do things the way I want". We'd like to tell the PM, "You want to reform? Let's do total reform."'

Pawan Kumar, bottom, left, organising secretary of the Bharatiya Mazdoor Sangh (BMS) affiliated to the Rashtriya Swayamsevak Sangh (RSS), tells Aditi Phadnis it will join forces with other trade unions if necessary to oppose the Employees' Provident Fund Organisation (EPFO) provisions in the Union Budget.

What do you think of this Budget?

We have to look at the Budget in totality. It has many good things in it, especially the references to rural India and farmers. For the first time, after years of Congress rule, a government has given so much to farmers: Rs 38,500 crore allotted for employment generation activities like the MGNREGA. Last year this figure was Rs 30,000 crore (Rs 300 billion). If allocation for the MGNREGA is increased, workers and wage earners will benefit. Last year's allocation was fully utilised.

But you have opposed the government's move to tax EPF withdrawals….

This provision is a fallout of the previous United Progressive Alliance (UPA) government, which had declared that all PF schemes would be taxed. If you recall, the EET (exempt- exempt tax) was the formulation of the previous regime; it envisages tax exemption at the time of deposit and interest earnings and taxation at the time of withdrawal.

What this Budget says is accept EET and tax EPF but with some exceptions: Only those earning Rs 15,000 or more will be taxed when they withdraw their EPF; the tax will be in proportion to the income slab they fall under; even on that withdrawal, it is only the interest accruing after April 2016 that will be taxed; and it is only the interest on 60 per cent of the withdrawal that will be taxed.

There are several areas of confusion, which the government needs to clarify. First, how can interest earned on EPF be deemed income?

Second, my EPF will continue to earn interest till my retirement. If I make a withdrawal now, and again withdraw EPF when I retire, will I be taxed twice?

Third, we have members who have no income - they get a stipend, wages, payment for the labour they do… They save something from that and maybe, put it in EPF. Will these savings also be taxed? If so, that is illegal and unconstitutional. Nahin karna chahiye (that should not be done).

I may be wrong, or I may be right, but there are two other issues. The then UPA government brought the National Pension System (NPS) on January 1, 2004.

The NPS did not get the results the government expected. After all these years, according to the Pension Fund Regulatory and Development Authority, its subscriber base is only 7.1 million. That too is mostly on account of compulsion - if you joined the government on January 1, 2004 or later, membership of the NPS was mandatory.

This is why in this Budget the EPF tax clause has an exception: If you buy an annuity, you don't have to pay tax. This is because the government wants more and more people to buy annuities. And we know what the fate of annuities is; we know that better than the government.

We believe the EPFO scheme has definite benefits such as EPF, pension, insurance, widow pension, orphan pension and children pension. These are not available under the NPS.

What is your opinion of the government's stance on small savings?

Another apprehension we have pertains to the Budget proposal on small savings. For the last 10 to 12 years, during the UPA rule, interest on small savings has been decreasing progressively. They are being made to look less attractive. For years, agents who used to solicit and bring small savings to post offices, were the point of interface between small savers and the government.

An agent would come to your house, collect Rs 1,000 - sometimes even less - that you could put away for a rainy day. Intelligent housewives would save whatever they could through judicious housekeeping. The agents got a small fee from the government that sustained them and their families.

This work kept millions of people in the business. Now, those post office savings agents have been told that the government will pay them nothing. Nobody even knows where they went. Basically, small savings have been disincentivised. Is the EPFO tax yet another way of demoralising small savers?

Regarding the government's policy on labour regulation….

Let me give you another example. The government wants to create jobs. The initiative is praiseworthy. The prime minister has launched Start Up India and Stand Up India. He has announced that for three years, the government will contribute 8.33 per cent in a pension fund so that start-ups are not hampered by problems.

But it has also said that for three years start-ups will get no visits from labour inspectors. In other words, there will be no supervision: If start-ups decide to open accounts in the names of their chacha, tau and mama (relatives) and ask the government to deposit 8.33 per cent pension in such accounts, who will check this? Remember, there is no inspection, no permission to start trade unions… The step itself is welcome; but without inspection there is a lot of risk.

On labour law, we want the government to review it, not reform it. Workers' rights should not be snatched away.

But in Rajasthan where the law has been amended, haven't workers' rights been snatched away ? Gujarat, too, is trying to do it….

When the Rajasthan government brought the law, the BMS was at the forefront of the agitation against the government. Wherever the chief minister went, we organised protests against her.

We were beaten, water cannons were used against us. We continued our agitation. Our other so-called aggressive union friends were not to be seen anywhere. We fight for labour issues, not politics. Our friends fight for political issues via labour issues.

What about the Narendra Modi government's attempts to change labour laws at the level of the Centre?

On the issue of Factories Act, we told Modiji we want tripartite consultations. Let us be clear: The government is the government, no matter what its complexion or colour.

We have had governments of all complexions since 1990. Indrajit Gupta and Chaturanan Mishra, both life-long Communist leaders, were part of the government. Did the government's view of labour law change? We do our job, the government does its job.

Modiji says all this is being done to facilitate ease of doing business in India. He tells us India has jumped from 142 to 130 on the World Bank's list of ease of doing business.

But the government's claims were exposed when the World Bank said that neither labour nor labour law was part of its parameters in the ranking.

The BMS believes in the ease of living life. Jiska jeevan hi aasan nahin, woh aasani se vyapar kya karega (If there is no ease in the way you live, what ease can there be in the way you do business)?

There is another area where we would like to see reform - in the bureaucracy. The prime minister in his speech in the Lok Sabha also referred to this.

When a bureaucrat joins the government he thinks, "my minister is here for five years, but I am going to be here for 35 years; so let me do things the way I want". We'd like to tell the PM, "You want to reform? Let's do total reform."

Illustration, courtesy: Business Standard