Towards a lean tax department

Relevance: Filling of vacancies is not necessary always. Technology can ensure that a high operational efficiency is maintained even with a lean workforce.

Synopsis: Worries about vacant positions in the Income Tax (IT) department and their impact on tax collection may be misplaced in a world of technological disruptions.

Background

As per news reports, almost 80% of the posts of chief commissioners in the income tax department have been lying vacant for several months. Some of the vacancies had not been filled for as long as about a year.

• Against 91 approved positions of chief commissioners, only 18 had been filled.
• The total number of vacancies at the level of commissioners and above was about 400.

Performance of IT department

If one looks at the following factors, it becomes clear that filling the vacancies is not needed.

No adverse impact on Direct tax collection

• Due to the pandemic in 2020-21, direct tax revenues collected saw a contraction of about 10% last year.
• In 2019-20, when there was no pandemic and the income tax department presumably did not suffer from large-scale vacancies, collections of direct taxes had dropped by close to 9% over those in 2018-19.
• Direct tax collections, net of refunds, in April-June 2021 were 43% higher than those in the same quarter of 2020.

Use of technology

The government has introduced technology in a big way to reduce the extent of physical interface with taxpayers.

• Faceless scrutiny and assessments can be completed much faster, with fewer people, with the use of technology.
• The preliminary processing of tax returns is already undertaken with the help of technology.

Also, globally, there has been a trend of reducing the number of officials employed by the direct taxes department.

Way forward

Instead of filling vacancies finance ministry should refocus its energies appropriately on other aspects of tax collection and administration.