MoF to tighten I-T regime for better tax compliance

Santosh Tiwary

New Delhi, Nov 27: The government is gearing up to tighten the income tax (I-T) administration through measures to improve tax compliance.

Finance ministry (MoF) sources said that the Budget for 2002-03 was likely to introduce measures to achieve this objective, which would be followed by the administrative actions. They added that the idea was to put in place a credible “carrot and stick” policy in coming years.

According to them, the focus areas in this regard will be improvement in the quality of assessment and scrutiny of tax returns, which is now possible with computerisation of the department which will be completed in next 2-3 years.

A senior revenue department official said that the Central Board of Direct Taxes (CBDT) was already in the process of ensuring an improvement in the quality of assessment by devising mechanism through which the work would be guided by senior officials and accountability would be fixed in case of an error costing the government substantial revenue.

He added that the department would also keep a tab on the corruption aspect in the assessment of I-T returns.

Sources said that in the 2002-03 Budget, the government was also expected to strengthen the scrutiny mechanism.

Finance minister Yashwant Sinha has already indicated that the scrutiny process, which had taken a back seat due to the lack of computerisation in the tax department, would be beefed up.
The Planning Commission advisory group on tax policy and tax administration for the Tenth Plan has also recommended that the I-T department must maintain a credible minimum deterrent level. It has suggested that care should be taken to ensure that a certain minimum percentage of tax payers are annually scrutinised but the scheme for selection of cases was absolutely secret but fair.

The panel has pointed out that the CBDT’s move to virtually abandon the scrutiny process except in certain cases where specific information of incorrect income reporting existed, was not conducive in maintaining a minimum deterrence level, which was the key to promoting voluntary compliance.

Among other measures to tighten the tax administration, it has suggested that a policy decision should be taken by the government to write off arrears above a certain amount, particularly, in all cases where the identity of the tax payer was doubtful.

“This will enable the department to concentrate on large arrears, which would be pursued vigorously,” the panel has recommended.
It has also said that the department should immediately identify those who have stopped filing income tax returns, and issue notices to them.