That’s the crux of the PM’s message to the taxman
Prime minister Narendra Modi’s presence at the annual conference of the Central Board of Direct taxes (CBDT) and Central Board of Excise and Customs (CBEC), held jointly for the first time, was meant to clearly tell the taxman that he intended to keep a close eye on their functioning. Indeed, some months ago, Modi had said that the taxman would no longer be evaluated on the basis of the tax notices sent, but on the proportion that stood the scrutiny of the courts—not surprising, then, that most of those compulsorily retired by the government have been taxmen. Given that it is the taxman that is seen as one of the biggest barriers to doing business in India, Modi knows it is critical that this be addressed. Though tax terror is popularly identified with Vodafone and Cairn among other MNCs, it is actually much worse. In 2007, Pune-based stud-farm owner Hasan Ali was slapped with a Rs 33,000 crore tax demand; this was reduced to Rs 3 crore by the appellate tribunal a few months ago. Indeed, between FY10 and FY15, while tax collections doubled, so-called arrears rose 4.8 times to Rs 7,00,761 crore and, within this, disputed arrears rose 6.6 times to Rs 6,14,956 crore. Combine this with the dismal success of the taxman in getting the cases either through the income tax tribunals or through various courts, this is not even helping the government increase its tax revenues. Which is why, Modi has said that the taxman needs to correct his ways, to ensure there is not an adversarial relationship with taxpayers and to find ways to dramatically increase the number of taxpayers.
To be sure, the government has taken several steps to try and fix things. This includes asking the taxman to speed up disposal of pending cases, opening up more dispute resolution forum and working on Advance Pricing Agreements with companies and, in many cases, not challenging court judgments that have gone against the taxman. The Tax Administration Reform Commission has also made various suggestions from increased data mining to greater clarity and supervision from the two tax boards, indeed even merging them—a separate litigation wing in the tax department will also ensure that tax notices are examined by neutral parties before being issued. The prime minister has added his 5-point RAPID charter to this impressive list of dos and don’ts—R for Revenue, A for Accountability, P for Probity, I for Information and D for Digitisation. But as he himself said at a party meeting some days ago, people want results, they are no longer impressed by slogans.