Given how aggressive the taxman is, it is not surprising that direct tax arrears are up from R2.5 lakh crore in FY11 to R4.8 lakh crore in FY13, and indirect tax ones from R0.3 lakh crore to R1 lakh crore. So it shouldn’t come as a shock to know that the latest PwC-World Bank report on Paying Taxes ranks India as 158th among 189 countries. These rankings, of course, are not based on the aggressiveness of the taxman and are more related to the time taken to file taxes, the quantum of returns that need to be filed, and things like that. So, it takes 243 hours to pay your taxes in India—that’s almost a month of 8-hour days—versus just 78 in Hong Kong and 82 in Singapore.
With more e-filing, the time taken is likely to reduce and, paradoxically, this will also increase the taxman’s ability to mine the data as it will increasingly be in machine-readable form. In order to avoid harassment, the taxman needs to keep a few things in mind. For one, it may be a better idea to be more trusting since 50-60% of appeals in courts/tribunals tend to go against the taxman. Two, of the cases picked up for scrutiny, the success rate is well under 10%. Combining enough databases—matching PAN numbers with spending on credit cards, hotels, travel, property purchases etc—so the assessee knows he’s being watched is likely to yield pretty good results.