Streamlined Tax Administration: Govt move welcome, but more needed

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Updated: Dec 07, 2020 6:06 PM

The Modi government has belatedly taken measures to streamline the tax administration system, which is a much-needed, welcome move. However, much needs to be done.

income tax return due dateThe Income Tax Department said in a tweet that 7,65,836 ITRs were filed up to 1600 hour today and 1,35,408 ITRs were filed in the last 1 hour.

One of the pet peeves of India Inc in the past few years has been “tax terrorism”. There are various instances of how the ubiquitous tax inspector, which reminds one of the pre-1991 licence quota raj, has also been responsible for misery and even deaths. The Narendra Modi government, which has completed six years in office, has belatedly taken measures to streamline the tax administration system, thereby assuaging India Inc and taxpayers. For a government that calls for respecting wealth creators, this is a much-needed, welcome move.

It’s just not the tax inspector and tax terrorism; the sheer number of income tax cases pending before the ITATs, high courts, the Supreme Court is mind-boggling. The time and energy that we spend on the resolution of these disputes can surely be used in more productive engagements.

While cases pending before the ITAT in 2017-18 were around 37,500, they increased some 2.4 times to around 92,000 in 2018-19. These numbers don’t tell us about the enormity of the problem.

Consider this: A mind-boggling sum of Rs 8 lakh crore is the amount of taxes on income tax under dispute, at the end of 2018-19. And, what is the tax amount not under dispute? Rs 1.38 lakh crore. What does this say about the tax administration system?

Considering that as much as 60 percent of the outstanding disputes have come in the last two years, in the present regime, shouldn’t the incumbent government address the issue on a war-footing?

If one wants to look at how the system works towards income tax dispute resolution, these numbers should be an eye-opener. Of some 31,000 appeals pending before the Commissioners of Income Tax – Appeals for more than five years on April, 2019, only some 7600 were cleared till November-end, 2019. A pendency of 75 percent! What does this say about the tax administration system?

Going by rough estimates, and anecdotal evidence, it could take anywhere from 20 to 25 years for a tax dispute matter to be resolved – from the time an assessment is done to the time the apex court decides on the matter. This should concern all, including India Inc and the government.

The government has finally woken up to the problem, and taken some belated, welcome measures. PM Narendra Modi, early this year in August, launched the platform, ‘Transparent Taxation — Honouring the Honest’. It entails faceless assessments, faceless appeals, plus a taxpayer’s charter — which was talked about in this year’s Union Budget.

It’s being said that faceless assessment and appeals would be a boon as they eliminate any physical interface between taxpayers and tax authorities. It’s thus expected that it will reduce the discretion of the tax inspector, bring in transparency and efficiency in the assessment and appeal process. Hopefully, the instances of tax terrorism will be a past hereafter. This is a much-need tax reform.

How does the architecture of this process work? It’s being said that taxpayers will not be attached to a specific office / territory / jurisdiction for any assessment. It will be the National e-Assessment Centre (NeAC) that will facilitate any communication between taxpayers and tax authorities. This, hopefully, will go a long way in reducing tax litigations.

More innovative measures could be thought of. Like CBDT could focus on resolving the huge number of pending appeals before various fora.

Faceless assessments will be welcome by the taxpayers. The very thought that the tax inspector has been pushed to the background brings relief. Now, the government and authorities need to work on timelines. All pending tax appeals should be cleared within a stipulated timeframe.

Our taxes help build the nation. It’s time that we taxpayers are respected for that, and not harassed. It’s time that the tax system was cleaned, and streamlined – so essential for ease of doing business in any country.

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