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The Budget proposals will not improve ease of paying taxes due to poor tax administrative reforms, according to Parthasarathi Shome, Visiting Fellow, Madras Institute of Development Studies, and former adviser to finance minister.
“There are very little concrete tax administration reforms despite TARC’s (Tax Administration Reform Commission) recommendations,” he said in a lecture on Union Budget at the Institute.
Lag in reforms It was conveyed by Finance Minister Arun Jaitley that the recommendations of TARC will be implemented in 2015-16. But nothing seems to have happened relating to tax reforms, he said.
“There is no benchmarking on the implementation of tax policies with the rest of the world. For years, India’s ranking remained at 172nd position out of 190 countries in ease of paying taxes. There isn’t adequate attention to this despite several volumes of recommendations to transform the tax administration,” he argued.
Shome also felt that the one-page form for income tax returns for individuals who have taxable income of less than ₹5 lakh (other than business income) would be good only on paper.
“Altogether our income tax regime remains much more complex than average level if we benchmark ourselves with the developed or emerging economies,” he added.
He was of the view that people would not come voluntarily to pay taxes until the poor tax administration was corrected. He highlighted the same while referring to the budget announcement of tax rate reduction from 10 per cent to five per cent for ₹2.5-5 lakh income bracket.
Poor reputation He also pointed out that the reputation of India’s tax administration was poor outside the country.
“We are not even mentioned in the hiring list of IMF or OECD. So, our tax administrators can never be hired as consultants or representatives for helping some poor countries. Tax administrators from countries such as Bolivia are considered for hiring, but not Indian officers,” he stated.
“Some of the tax officials may be intelligent, but they lack knowledge on tax matters relating to the rest of the world,” he added.
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