TARC Suggestions for Immediate Attention and Possible Action - Merge CBDT and CBEC
THE Tax Administration Reform Commission (TARC), after considerable deliberation and consultation, has made a menu of recommendations that should be taken as a package and reform should be undertaken on that basis. However, instead of waiting for massive action to take place, it is feasible to initiate action immediately on various fronts and the Commission has suggested the following:
Customer focus:
Improving the way in which tax administrations work with taxpayers not only results in better customer service but also has the potential to increase tax revenue. Taxpayers are more likely to comply voluntarily when tax administrations adopt a service-oriented approach towards them. Educating and assisting taxpayers help them meet their obligations comfortably. Taxpayer services, therefore, need to be taken as an integral part of the functions of a responsible and responsive tax administration, and these should, therefore, be strategised and institutionalised as an on-going and continuous process rather than a sporadic one.
Set up Large Taxpayer Service (LBS):
The present silo working of the Large Taxpayer Units (LTUs) has not achieved desired integration through data sharing or building a common framework for delivery of services to taxpayers. The experience so far has been far from satisfactory, preventing a comprehensive taxpayer focus. It also fails to provide a level playing field among similarly placed, large taxpayers in other countries. Setting up Large Taxpayer Service (LBS) with unified taxpayer services, compliance verification, dispute management, and recovery and tax debt collection will provide improve the ease of doing business.
How can Large Taxpayer Service be called (LBS)? But that's how TARC calls it! Elsewhere in the report TARC states that LBS is Large Business Service.
Dispute management:
The Indian tax administration has more disputes than any other by far. It is important to relieve the tax administration as well as the taxpayer of the undesirable burden of this legacy so that both can look to a more positive and productive future. A special drive should be launched to review and liquidate cases currently clogging the system by setting up dedicated task forces in the two Boards having measurable targets.
Joint Tax Policy and Analysis:
Currently, little meaningful analysis is carried out by the Tax Policy and Legislation (TPL) and Tax Research Unit (TRU) of the CBDT and CBEC, respectively, which would stand the test of international comparisons. Tax law making is required to be carried out with a more consistent and coherent approach in a joint Tax Policy and Analysis (TPA) wing of the two Boards with enhanced research. The TPA should have multidisciplinary inputs and data analysis, so that tax laws, which are an important instrument of fiscal policy, reflect that character. The present silo working, the units of the two Boards working independently and reaching the Finance Minister in separate channels, does not achieve this basic objective. It defeats the objective of achieving ease of doing business on the one hand, and consolidating the investigation function on the other.
Common database:
A common and unified database of taxpayers between the two Boards - currently absent in contrast to international practice - will lead to great gains both in terms of enforcement and taxpayer services. The establishment of an independent entity through an SPV for a common and unified database focused on ICT-based service delivery will provide the concentration, flexibility, nimbleness, resources and specialised skills that are direly needed. An SPV will also provide the desired economies of scale in computerisation, contribute towards establishing common data standards, and build security systems and practices acceptable to both Boards. Overall, the digital transformation will offer new opportunities for sharpening the tax administration.
Optimally merge the CBDT and CBEC's department functions in a step-wise manner:
As a step towards fundamental tax administration reform, and following widespread international practice, the present structure of the CBDT and CBEC should be unified and converged in the next five years in governance, vision, mission and approach to tax policy formulation and administrative delivery to taxpayers, anchored in a more unified management structure, so that it is able to respond to emerging challenges quickly and positively. An announcement to this effect - that government means to undertake convergence - will be a landmark step in the right direction.