The Hindu Business Line : Make it less taxing

NO LAW, LEAST of all a tax legislation, is unchangeable especially in a civil society which has found its moorings in a democratic system of governance. But the amendments to the Income-Tax Act, 1961, said to number over 5,000 since enactment, have today made even the seasoned tax practitioner quail at the thought of sifting through them, and all these changes in an Act which has as many as 298 Sections. This needs serious attention. It can safely be said that no other piece of legislation in India has seen so many changes. For instance, just the Budget for 2004-05 had as many as 108 amendments on the tax side (both direct and indirect). Surely, laws need additions and alterations, but changes made on trial and error basis are certainly not healthy. And looking at the scale of change in the I-T Act, one wonders if all this, done on the plea of rationalisation and simplification, has not added to the confusion.

For instance, the various limits and sub-limits for tax rebates on the gross total income under Section 88 is a classic case. A popular view is that changes in such provisions should be brought about only after thorough research by an experts' team, which must also organise a nationwide debate; as far as possible, changes should have a five-year staying time, before a re-examination. There is no gainsaying that such an approach would not only help the taxpayer and the practitioner but also pave the way for setting out a much-needed long-term tax policy. The Finance Minister, readying with yet another Budget, would do well to remember the observations of the Raja Chelliah Committee on Tax Reforms in its final report (in the chapter on "Problems Relating to Tax Administration") that "in order to judge what kind of changes should be brought about, we must look the root causes for the present unsatisfactory state of affairs in the field of tax administration." And one such is "recurrent changes in the law brought about at Budget time, generally conceived in secrecy and proposed and enacted without adequate public consultation and debate". The most irritating exercise, in the opinion of both the tax expert and the assessee, is that of amending the rates and granting exemptions throughout the year by issuing notifications. Again in the words of Prof Chelliah: "The tax system and its burden must be acceptable to the citizens, that is, the potential taxpayers." A simple tax system, according to many, ideally should have only a limited number of rates and exemptions or deductions, and offer the "least possible discretionary power to the tax officials for interpreting the law".

The Income-Tax Department in recent times has taken major steps to speed up assessments and to redress grievances of taxpayers. But the general perception is that the pace of improvement has fallen far short of what is required. While it is admitted that much remains to be done by the Department to bring about that spring in the step of the Income-Tax Officer to hold his head high and act without fear or favour, an immediate requirement is true simplification of the law, along with moderation in rates, in tandem with modern methods of communication.

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