From the Viewsroom

Towards better tax collections

Tina Edwin | Updated on January 12, 2018

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Focus on reducing disputes between authorities and taxpayers

The Government is rather pleased that its gross tax revenue as a proportion of GDP would settle over 11 per cent in the current and the next fiscal year. This is the first time since 2007-08 that this ratio is set to cross the 11 per cent mark and the Budget 2017-18 documents do not fail to make that point. The improvement in the ratio is a result of higher growth in tax revenues. Tax revenue collections in the current year were mostly boosted by various schemes to declare undisclosed income and higher excise duties on petroleum products. The Government has assumed that the demonetisation move has widened the tax net, resulting in many more individuals and businesses paying taxes from the current fiscal year. Under-declarations are also expected to decline this year onwards, as the Government is now going after evaders with information on incomes, investments and businesses.

However, the Government could do better on the ratios, if only it would reduce disputes with taxpayers. Budget documents report that tax revenues raised but not realised over the years is climbing. At the end of 2015-16, the cumulative amount was ₹7,76,916 crore, of which ₹6,83,188 was classified as under dispute and the balance ₹93,728 crore as amount not under dispute. That amount rose by 11 per cent between 2014-15 and 2015-16 after climbing by a steep 20 per cent the preceding year. The realisation of taxes due with minimum dispute would ensure that overall collections rise. Disputes can be reduced only if the tax laws are interpreted similarly by different sets of people. It also requires a stable tax regime, and consistent, unbiased application of the laws. That apart, the tax department needs to adopt a friendlier yet professional approach towards taxpayers. For that, the human interface between authorities and taxpayers needs to decline. Such measure can help improve tax collections as well as tax-GDP ratio.

Senior Deputy Editor

Published on February 12, 2017

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