The improvement in voluntary tax compliance may bring in some good news for the taxpayers in the country. In fact, the finance ministry on Thursday seemed in favour of moderating income tax rates.
?With improvement in voluntary tax compliance and tax administration, direct tax collections are growing by around 45%,? Parthasarthy Shome, advisor to finance minister P Chidambaram, said.
?For voluntary compliance, we cannot have a marginal personal (income) tax rate that is too high,? he added.
The entire tax structure would, in fact, be looked at if voluntary compliance continues to increase, Shome said while addressing a conference by Tax and. He, however, did not say whether this would happen in Budget 2008-09.
Direct tax collections have grown by over 40% till November amounting to Rs 1,45,053 crore and income tax rates in India are comparable to those at international level and other countries in the region, he pointed out.
Any moderation in tax rates would, however, be done along with more measures to prevent tax evasion and to boost revenue collections, Shome said. One such measure may be expanding the scope of annual information returns (AIR).
In Brazil, third party information on taxpayers? expenditure is provided through more than 40 sources, he pointed out, adding that eventually India may too have to increase the number of AIRs from the present seven.
?Over past decades, we have moved away from very high tax rates to commonly acceptable tax rates. We are not terribly away from international comparison,? Shome said referring to tax rates in Latin America, Europe and Southeast Asia.
Shome?s statement comes in the backdrop of the fact that the finance ministry has received recommendations from a number of industry chambers asking for moderation in personal and corporate income tax rates. Shome also said in the planned Direct Tax Code, the government plans to come up with an income tax code, which would simplify the laws and tax structure.