T. C. A. Ramanujam

The Finance Minister has set himself the difficult task of raising the tax-GDP ratio from 10.5 per cent to 11.2 per cent.

Having realised that it is not by raising the tax rates but by enlarging the tax base that would help achieve this goal, Mr P. Chidambaram has chosen to concentrate on revamping the tax administration by digitalising the same and making it modern, efficient and transparent. The income-tax offices will undergo business process re-engineering and a nationwide network will connect 745 of these offices in 510 cities creating a national database and national data centre. This is welcome.

Also, tax returns can now be filed anywhere perhaps, this is what the FM means by permitting jurisdiction-free filing . At present, PROs in income-tax offices guide assessees to ITOs having jurisdiction to receive the returns. With e-filing, asseessees may no longer have to face this hassle. An innovation of sorts is the proposed introduction of the Tax Return Preparer to help the taxpaying public in filing their returns.

The Finance Minister has also announced that the status of refund claims can be tracked online. Tax refunds have been the bane of the Department. High interest is being paid on refunds, and interest on interest adds to the liability.

Refunds paid amounted to Rs 28,051 crore in 2004-05 and Rs 25,737 crore in 2003-04. Despite significant increase in collection, there has been no increase in the number of assessees in the last three years.

The number of taxpayers has fallen from 2,66,24,224 in 2003-04 to 2,47,92,990 in 2004-05. The proposal to make PAN mandatory is welcome. The AIR mechanism is being strengthened for this.

One-by-six scheme:

The abolition of this scheme will come as a big relief for income-tax officers, who will spared of infructuous paperwork. After all, the numbers of those filing such returns have been falling.

Policy initiative:

An innovative announcement is that every year the tax expenditure statement will be laid before Parliament along with the Budget papers, indicating the revenue foregone because of tax concessions and incentives.

This will make the Budgets more transparent.

(The author is a former Chief Commissioner of Income-Tax.)

(This article was published in the Business Line print edition dated March 1, 2006)
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