Given the success of the tax forum headed by Parthasarathi Shome in creating a platform for open discussion of tax-related problems towards the end of the UPA regime, it is a good thing finance minister Arun Jaitley has decided to formalise the mechanism—while industry can always discuss its problems with tax officials, the tax forum introduces independent experts which helps paper over many problems as well as imparts a degree of impartiality to the process. But the real test of the panel will be whether it succeeds in finding a workable way in dealing with complicated tax issues like retrospective taxation or handling of transfer pricing orders. The Shome tax durbar’s remit, unfortunately, was limited to administrative issues. Though the tax forum did solve 29 direct taxes and 47 indirect taxes issues, this never stopped the taxman from carrying on with its high-pitched assessments—to that extent, this robbed the tax durbar of some of its legitimacy.
This is probably the reason why the Tax Administration Reforms Commission (TARC)—also headed by Shome—in its report, has suggested creation of a permanent body on the lines of the tax forum to deal with the tax disputes. The TARC wants the two tax boards to respond to the suggestions of the panel on administrative as well as policy matters within a fixed time-frame, say three months, and if this is not done, the issue is to be put up before the finance minister. Considering the difficulties in getting the taxman implement the decisions taken by outside experts or forum, it remains to be seen whether an institutionalised mechanism will introduce transparency and will help provide quick remedies. It is clear, though, that if India’s tax system is to be made more friendly, and the taxman is to not waste his time chasing frivolous cases—the taxman loses 88% of the cases in the Supreme Court and 79% in the tribunals—the forum needs to be suitably empowered. Failing which, the forum will become a bit like the Rangachary committee which, after holding discussions with industry, came out with formulations on transfer-pricing that were mostly not accepted by the taxman. The ball is in finance minister Jaitley’s court.