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New Taxpayers Charter Needs Effective Implementation
Introduction:
Government has unveiled a new scheme of “Transparent Taxation – Honoring the Honest”. It provides for tax reforms of faceless assessments, faceless appeals and taxpayers charter. Its objective is seamless tax filing, assessment and appeals without harassment and burden for taxpayers.
Provisions of the scheme:
Faceless tax system:
- Data analytics and AI based tax assessment
- Automated random allocation of cases for appeals
- No physical interface and no need to visit offices
- Draft assessment, review and finalization in different cities
- Only exceptions include serious fraud, tax evasion, sensitive search matters, international taxation, black money and benami properties
Taxpayers Charter: Has 14 obligations of revenue department and 6 duties of taxpayers
Issues in pre-existing framework for protection of taxpayers rights:
- Citizens charter with the Sevottam framework was adopted by the tax department in 1998. But it is ineffective due to non statutory nature and lack of accountability mechanisms.
- An ombudsman to bring accountability in the tax department was established as per Kelkar task force recommendations of 2002. But it has proved ineffective
- In recent years, use of technology has led to improvement in tax return filings, automation of withholding tax and regular assessment of refunds. But issues remain in privacy and confidentiality, non coercive measures of collection, cross border procedures, retrospective taxation guidelines etc.
The 2014 tax administration reform commission has emphasized these issues and the need for a revised charter based on the needs of taxpayers.
New charter released by the government is aimed at addressing these concerns.
Success depends on implementation of charter:
Translation of new charter into implementation must adopt best global standards for success. Following steps will help in achieving this:
- Legal limits on retrospective taxation
- Public consultation in shaping tax policy and law
- Binding rulings to restrict revenue department in appealing advance rulings
- Presumption of honesty: Prevention of double jeopardy(penalizing twice for the same offense); right to be heard before order is issued and principle against self incrimination must be adopted.
- Reduction of cost of complianceby:
- Using government data to prefill returns. This prevents the need for paid CAs. This also improves government data collection.
- Centralized procedure for group entities/families(trusts etc) to prevent multiple advisors
- Non binding administrative guidance: Online assistance can be provided to individual taxpayers, MSME’s, businesses, senior citizens, persons with disabilities and those from remote areas. This promotes trust and acceptance.
- Effective grievance redressal:
- Immediate action by a dedicated cell
- Guilty officials must provide an apology and token compensation as is seen in Australia
- 360 degree evaluation of tax officials must include findings of grievance redressal cell
- Tax collection only as per law:
- Tax demands must not be higher than mandated by law. Currently high demand and subsequent litigation has only increased burden. Further tax appeals of departments have low success rates due to such high assessments.
- Coercive measures like attachment of bank accounts must be used only in exceptional situations
- Confidentiality and privacy:
- Rules governing tax inspections, particularly on surveys and search operations, should be aimed at protecting citizen’s right to privacy
- Breaches must be made an offense and investigating official must be made accountable
- Judicial authorization must be mandatory for public disclosures under ‘Naming and shaming’ policy.
- Accountability mechanisms to be inbuilt: Annual assessment reports, periodic feedback from taxpayers must be present.
Conclusion:
Taxpayers charter has the potential to make tax law predictable and protects the rights of taxpayers. It can prevent burden on honest taxpayers while deterring errant taxpayers. Its implementation must be effective to realize ‘Minimum government, Maximum governance’
Source: Financial Express
Mains question:
- New taxpayers charter empowers honest taxpayers. Discuss? [15 marks, 250 words]
