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Tax Reforms- Old Mindset, New Technology

The CBDT is now said to be pitching for a non-adversarial tax regime, to maximise revenue collection, but with impeccable and friendly conduct by the tax officers.

 

The tragic demise of V G Siddhartha, the dynamic CCD founder and the reasons behind it, as stated in his last letter, has been shocking and have led to a public outcry. He mentioned of harassment by the Income Tax Department, in as much as that his shares were attached on two different occasions by the former DG, ITD, blocking his sale of shares of Mindtree, which resulted in a serious liquidity crunch, and precipitated the fatal crisis on him.

The CBDT is now probing the alleged harassment by the then D G, Shri B R Balakrishnan, now retired, though the fact is that he was posted in Bangalore for a purpose and all his actions had the tacit approval of his Delhi bosses and even the CBDT could not have been unaware of his harsh actions. It is after all the CBDT instructions directing field officers to collect taxes by any means and to appellate authorities to be revenue minded in deciding appeals that have led to such draconian steps by the ITD officers, even though it now displays a change of attitude in the post- VG Siddhartha demise era.

The CBDT is now said to be pitching for a non-adversarial tax regime, to maximise revenue collection, but with impeccable and friendly conduct by the tax officers. In its annual action plan, the CBDT is trying to reach out to taxpayer and has directed officials to engage citizens, to achieve objectives of a fair and transparent administration, and high standards of taxpayer service, which ultimately translates into higher levels of voluntary compliance.

As part of its initiative to build a taxpayer-friendly and non corrupt tax administration regime, the ITD of late has announced a series of initiatives, including a series of meetings of the FM and her top officers, with taxpayers and their representatives in various cities of India, introduction of computer-generated notices with a DIN to curb the nuisance of unauthorised tax notices and summons, ensuring that notices are issued in a friendly language and not in a threatening/intimidating jargon, making available information regarding large cash deposits and high-value transactions to the taxpayer before they file their returns, prefilled IT returns, and adopting a friendly and cordial attitude to taxpayer.

It is unfortunate that you need the suicide of a high profile entrepreneur, to get the tax departments to realise how unfriendly and coercive they can be. But one has seen such specious reform efforts earlier and they have failed to bridge the gap of confidence and cordially between the tax department and the taxpayer. These measures fail to convince that the tax department will be transformed for good. If the ITD wants to stop the harassment of innocent taxpayers, then the real measures to be taken are as under:-

 

  1. Do not deny exemptions and deductions due to taxpayers, by resorting to biased/perverse interpretation of the law.
  2. Do not deliberately delay/withhold bonafide refunds.
  3. Do not pursue recovery of contentious and controversial tax demands in appeal.
  4. Give the freedom to appellate authorities to pass fair and just orders, even if they are against the Revenue.
  5. Do not victimise officers whose orders appear to be pro assessee, but they are honest and bonafide.
  6. Stop giving targets for conducting raids, surveys, penalty imposing and prosecution.
  7. Stop imposing irrational collections targets, with no connection to the real economy.
  8. Make returns simpler, without the need to give unwanted data.
  9. Make IT systems easier and friendlier.
  10. Let IT officers be sensitive to taxpayer difficulties and crisis.

 

The PM is right when he says that wealth creators ie. taxpayers must not be viewed with suspicion, since they serve the nation, after all only if wealth is created will it be distributed. That is stating the obvious, but suddenly expecting a babu to respect an entrepreneur because he generates jobs and gives revenue to the government will not happen.

The fact is that over the years, every government department has become a risk factor that obstructs wealth creation in India and what is needed is a change in attitude. Without a change of mindset of the taxpayer and the tax department, new technology for tax administration will change nothing and harassment will continue.

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