Wanted: Efficiency

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[SAY NO TO LINES: Income tax assessees can now file e-returns and make e-payments &nbsp;for taxes (Pic by Tribhuwan Sharma) The quality of revenue administration significantly influences the investment climate in a country, and one that is arbitrary or predatory discourages investment. Also, weaknesses in enforcement capacity put law&ndash;abiding firms at a disadvantage, as other firms can get away with tax evasion. Reform of tax administration may be needed to enable it to keep up with the increasing sophistication of business activity. Without a matching increase in the professional and technological capacity of the revenue administration, its ability to monitor such activity is seriously compromised. India follows the &lsquo;type of tax&rsquo; model of tax administration. This entails the operation of separate departments for each tax and its particular variations that are largely independent of each other. Overlaid on the &lsquo;type of tax&rsquo; model, there is a geographical one. Jurisdiction over tax matters is geographically distributed to the commissionerates, divisions, ranges and circles. The complexities of tax laws in India and discretionary powers with the officers to interpret them have led to subjectivity. The approach has been that of a revenue collector, rather than that of a facilitator of business, with tax oversight. Several tax administrative reform projects have been undertaken in India, but their objectives have been in and around a variety of factors &mdash; improving organisation and management of revenue administration, strengthening the regulatory framework, broadening the tax base, and facilitating voluntary compliance. The introduction of the Large Taxpayer Unit (LTU) Scheme has been welcomed by a large section of industry. The first LTUs in the country have come up in Bangalore and Chennai and similar units are to be established in other cities, but the experience has been a mixed one so far. Income tax assessees can now file e-returns and make e-payments for taxes. Similarly, excise/service tax assessees have the facility of e-payment of taxes. E-payments of indirect taxes are mandatory for certain categories of tax payers. The government is implementing a project named Automation in Central Excise and Service Tax (ACES) with focus on improving the indirect tax administration. Measures to reduce pendency in litigation and to bring in harmony in the interpretation of tax statutes have been introduced. The setting up of the National Tax Tribunal, introduction of additional benches of the Appellate Tribunals and creation of a tax ombudsman for tax payers are some of the initiatives. On indirect taxes, provisions have been inserted in the statutes to encourage up front payment of taxes through reduced penalties, enhancement of monetary jurisdiction to facilitate adjudication at lower levels, etc. On direct taxes too, there has also been talk about introducing a new income tax Act with emphasis on defining terms used as lucidly as possible. The government has also set up a committee to identify anti-abuse and anti-avoidance provisions that need to be incorporated in the tax treaties India has signed. For revenue administration reform to be successful, critical requirements have to be met &mdash; a strong political commitment to reform, with clear decisions and the provision of necessary resources; professional and stable leadership; a willingness to abandon old, ineffective practices; and the establishment of a formal reform project with a clear achievable mandate, agreed objectives, and realistic time frames. Sustained and well thought out efforts in implementing global best practices will help modernise Indian tax administration. The government&rsquo;s efforts reflect its commitment to tax reform process, but there is still a lot to be done. The author is Leader of Indirect Tax Practice at PricewaterhouseCoopers (Businessworld 25 Feb-3 March 2008)