Is Revenue Coming because of Administration or despite it? - TARC wants Boards to question
THE Third Report of the Tax Administration Reform Commission (TARC) says:
To begin with, the two Boards need to seek honest answers to some simple questions. They need to ask themselves whether the revenue coming in is because of the administration or despite it. And if so, how much of it is because of the administration's efforts? Answers to these questions will illuminate their path to reform .
Some interesting extracts from the Report:
It will not be unfair to say generally that when taxpayers walk into a tax office in India, they cannot but feel a sense of trepidation, if not foreboding. It is not a prospect they look forward to even when in their estimation, they have followed the law. If they wish to get an issue resolved or clarified, even an ordinary one, it is not to the tax department that they turn to, for they have little hope of getting a decisive and reliable answer.
Ordinary law abiding taxpayers tend to view the tax administration - both direct and indirect - with a mixture of fear and lack of confidence and trust, while violators seem to have no fear of the administration.
The two Boards cannot hope to achieve the objective of maximising voluntary compliance without the co-operation of the community of taxpayers. The widely prevalent impression of a hostile tax environment in the country cannot be erased unless they address the root causes that have led to this impression, namely an unfriendly and unresponsive administration, a very high degree of uncertainty and unpredictability in tax matters due to inconsistent understanding and interpretation, and a huge amount of disputes and litigation.
It would be idle to talk about creating a climate conducive to voluntary compliance without first purging the pathology of issuing and confirming inflated tax demands and unjustifiable persistence in litigation that imposes heavy costs on the taxpayers. In fact, by letting many issues be decided by courts even when it is within their powers to clarify and settle them, the two Boards seem to have not only abdicated their responsibility but also ceded areas of tax policy to courts and allowed the growth of uncertainty.
The almost total obsession with meeting unrealistic revenue targets has led the tax administration to ignore more important and vital aspects of compliance management and resulted in a deplorable fall in the quality of the administration, driving taxpayers to frustration, exasperation and anger towards the administration. This can be ignored by the administration only to the country's peril.