Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

SIMPLE PRE-BUDGET PRESCRIPTION!

Via meaningful reforms in tax administration FM can earn immense tax-payer goodwill without losing any tax revenue!

              There was a time until the mid-1980s when our direct tax rates were so high, that Indian taxpayers used to pray to the FM, “Take away all our income, just return us our taxes!” However, the past 25 years have witnessed a considerable rationalization in the direct tax rate structure. And, after the peak income tax rate was brought down to 30% in 1997, India’s finance ministers have been justifiably boasting of the country having world class tax rates.

NOT JUST REASONABLE RATES WE NEED FAIR ADMINISTRATION TOO!

               “Taxation is the gentle art of picking the goose in such a way as to secure the greatest amount of feathers with the least amount of squawking,” said Benjamin Franklin. Thus, collecting tolerable tax alone is not enough, what is even more important is that it is collected in a reasonable manner, without any tax-payer grievances. Any amount of talk of simplification and rationalization of tax laws or maintaining moderate tax rates would not serve the cause, unless and until the revenue can win the confidence of tax-payers through just and upright tax administration.

                The Income-tax Act provides for imposition of harsh penalties on tax-payers, even for simple non-compliance though there is no loss of revenue or for filing of just trivially inaccurate particulars of income. 

                     The departmental machinery of internal audit also operates to merely safeguard the interests of revenue. Ironically, there is no provision or mechanism to hold assessing officers accountable for their deeds of mischief or highhandedness, even if they have framed absurd and arbitrary assessments, defying all limits of logic and common sense, openly flouting all principles of equity, natural justice and good conscience and exhibiting blatant disregard even for binding precedents and administrative directions, as laid down by courts or the Central Board of Direct Taxes (CBDT). 

ACCOUNTABILITY – NEED OF THE HOUR

                It is high time to end these strange double standards and ensure that officers of the department are also made equally accountable for their actions and inaction, as much as the administration expects the tax-payers to lawfully discharge their obligations. The FM should want to continue his crusade against tax evaders. At the same time, the horror and pain suffered by honest tax-payers through harsh scrutiny, high-pitched assessments, forcible disclosures during search and surveys, as also coercive tax collection and recovery measures should be avoided and erring officials must be dealt with sternly.

                Let us take a look at some unique tax payer rights around the world. In USA, every taxpayer enjoys the right to make audio recordings of his meeting with tax authorities. In Australia, a taxpayer has the vested right to be treated as being honest, unless otherwise proved. In Canada, the taxpayer is granted the right to be treated professionally, courteously & fairly by the tax administration

                Accountability in tax administration is the need of the hour and FM needs to effectively address this issue in the forthcoming Budget by making suitable legislative provisions. And this would be an entirely win-win situation, since the FM would undoubtedly earn immense tax-payer acclaim and goodwill without losing any revenue.

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