The tax collection machinery is getting more focused. All tax arrears below Rs 5,000 will be written off, sparing almost two-thirds of the over 1.9 crore taxpayers who have been slapped demands, in a move that would allow tax officers to focus on bigger cases that would yield revenue.
The futility of going after persons/entities who have little to pay up as arrears is evident from the fact that the total tax demand placed on over 1.2 crore taxpayers facing demands for Rs 5,000 or less is just Rs 1,445 crore. This is just 0.19% of the estimated total arrears of Rs 7.5 lakh crore from all taxpayers.
Including demands raised in certain cases that have not fallen due, direct tax arrears have now gone up to RS 8.27 lakh crore.
The move to write off past years’ dues below the Rs 5,000 threshold will also help field officers focus their efforts on large tax demands where the potential revenue receipt would outweigh the cost of collection, sources said. In fact, arrears from taxpayers who have to pay Rs 1 crore or more amount to Rs 6.68 lakh crore, which is 89% of total arrears. The Shome panel on administrative reforms had recommended the write-off of small arrears.
A significant part of the total arrears is difficult to recover for various reasons including stays issued by courts and non-traceability or bankruptcy of the assessees concerned, which reduce the actual annual target for tax recovery only a little over Rs 50,000 crore.
Officers have the authority to write of small amounts of tax arrears without going into the details or seeking evidence of certain claims from the assessees. The tax department has asked its top brass to set write-off targets for field officers.
At the same time, the tax authority, which has a target of collecting Rs 7.9 lakh crore this fiscal, 13% more than what it collected a year ago, is working on expanding the tax base by bringing more people into the tax net and increasing the share of tax deducted at source as well as that of advance tax in the gross tax receipts.
The idea is to rely more on non-intrusive and voluntary tax collection. The tax department earlier this week clarified that it would invoke serious anti-evasion provisions such as penalty and prosecution only in known and large cases of tax evasion and not in all possible cases of short payment of taxes in a routine fashion. Also, the message to field officers is to avoid making high-pitched and unrealistic assessments and instead focus on demands that would actually lead to recovery of dues.
Direct tax collection growth, which had been trailing the growth rate of GDP by market prices in the four years between 2008-09 and 2011-12, has in the subsequent two years grown faster, giving a tax buoyancy of 1.17% in 2013-14.