Direct tax reforms

ON the face of it, faceless assessment and appeals under direct tax reforms are a major step forward towards bringing transparency in the taxation system and empowering honest taxpayers. The fact that barely one per cent of India’s population — predominantly the salaried class — pays taxes shows that corrupt or negligent officials have largely failed to check tax evasion.

A Covid-hit country striving to rebuild its economy needs confidence-building measures that can drastically raise tax compliance and plug leakages. It has to be ensured that the honest are not harassed and the dishonest are not spared, and not the other way round, as is often the case now. A taxpayers’ charter has the potential to reduce the trust deficit between the government and the taxpayer. Why should people who have nothing to hide live in mortal fear of the taxman? The onus will be on the tax officials to act reasonably and avoid overreach. It is also imperative to widen the tax net and catch the big fish in particular. The number of individual taxpayers in the country who have disclosed annual income above Rs 50 lakh is as low as around 3 lakh (in case of income above Rs 5 crore, the figure is even less than 10,000). Last month, the Central Board of Direct Taxes signed an MoU with the Securities and Exchange Board of India for data exchange between the two organisations. More such steps can help in effectively zeroing in on the evaders.

Speedy resolution of tax disputes is another key factor. The funds locked in litigation serve no purpose; these can be released and put to use only if cases are disposed of without delay. A common grouse among Indian taxpayers is that they do their duty but are still deprived of quality services and facilities, including affordable healthcare, good roads and round-the-clock power supply, as the hard-earned money they part with is misused or not optimally utilised. It’s up to the government to ensure that valuable tax revenue does not go down the drain.

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