The finance ministry on Tuesday set up two new bodies — the Tax Policy Council (TPC) and Tax Policy Research Unit (TPRU) — with the broad objectives of achieving a more coherent approach to the making of tax policies and ensuring independent, multidisciplinary analysis of the proposals before decisions are taken.
The finance ministry on Tuesday set up two new bodies — the Tax Policy Council (TPC) and Tax Policy Research Unit (TPRU) — with the broad objectives of achieving a more coherent approach to the making of tax policies and ensuring independent, multidisciplinary analysis of the proposals before decisions are taken. The formation of the TPC, headed by the finance minister, will effectively reduce the freedom of the two apex bodies on taxation—– the Central Board of Direct Taxes (CBDT) and Central Board of Excise & Customs (CBEC) — to take decisions independent of each other and avoid potential inconsistencies in their policies.
The move is in line with the recommendations of the Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome, which had suggested structural changes in the handling of tax policy and related legislation.
Analysts have cited instances of the tax policies in the country being at conflict with one another and the field formations being not prompt in following the policy directions given from the top. Even when the political establishment promises a non-adversarial regime, certain wings of the tax administration tend to focus on revenue maximisation, even oblivious of the broader economic imperatives.
The 10-member TPC will look at all the research findings coming from TPRU and suggest broad policy measures for taxation. Its role will be advisory in nature.
The TPRU will be a multidisciplinary body with the objectives of carrying out studies on various topics of fiscal and tax policies referred to it by CBDT and CBEC and providing independent analysis on such topics. It will also prepare and disseminate policy papers and background papers on various tax policy issues and liaise with state commercial tax departments.
“The TPRU may also interact with various research institutions, wherever necessary. The TPRU will prepare for every tax proposal an analysis covering the following three points: The legislative intent behind the proposal, i.e., why this proposal is being framed and what is the policy objective, expected increase or decrease in tax collection through the proposal; and the likely economic impact (positive or negative) through the proposal (other than the effect on tax collection),” the finance ministry said in a statement.
The formation of the two panels will enable the government to take an integrated view of direct and indirect taxes and obtain inputs from a broad spectrum of professionals. This will help in the formulation of balanced and forward-looking tax policies, said Sunil Shah, partner at Deloitte Haskins & Sells LLP.
In its first report submitted to the government on May 30, 2014, the TARC had observed that since tax policy making is currently handled in the two boards i.e. CBDT and CBEC, independently in the Tax Research Unit (TRU) and Tax Policy and Legislation (TPL) wings, the proposals of the boards reach the finance minister in separate channels. The new Tax Policy Council will have minister of state for state for finance, deputy chairman, NITI Aayog, minister of state for commerce, finance secretary, secretary-DEA, revenue secretary, commerce secretary, secretary-DIPP and chief economic adviser as members. The chairpersons of the CBDT and CBEC would be special invitees.