The salaried class by far has the distinction of best tax compliance, caught as it is in the pincer of TDS and ease of tax computation by the employer, though that does not detract from the merit of his grouse that his is a thankless job, supposed to be done as a labour of love.

Indeed, TDS has been perceived the world-over as an excellent foil against tax evasion and expeditious collection of tax. There is no joy for the Revenue unless it puts in place a collection regime that is difficult to bypass or tinker with.

The Direct Taxes Code (the DTC) in the anvil does contain a regime designed to frustrate thumbing of noses by non-residents indulging in Vodafone type deals but the department might be pipped at the post for want of a suitable recovery mechanism.

A peremptory charging provision that fastens the non-resident with tax liability in India for deals consummated abroad would bear fruit only if there is put in place another peremptory regime that fastens someone in India with the liability to pay tax on behalf of the non-resident. And that ought to be the operating company in India in which the non-resident had vicariously invested through the conduit of a company in a tax haven.

presumptive tax scheme

Back home, the presumptive taxation schemes in vogue have not been particularly noteworthy, with those targeted looking askance at them, secure in the knowledge that tax authorities are not going to bestir, and knock at their doors anyway. The presumptive tax scheme in vogue for truckers that presumes profit per truck at certain amount has been a non-starter.

Instead of specifying the presumptive profit, the income-tax law would do well to specify what the tax amount is per truck per annum. And this should be enforced just the way the anti-pollution drive is — through stickers. There is no reason why the anti-pollution drive cannot be dovetailed with the presumptive tax scheme targeting the truckers.

The DTC seeks to up the limit for making the grade to the much broader presumptive tax scheme — 8 per cent of the turnover deemed to be the taxable profit. The scheme would be open to anyone save professionals — as against the one in vogue which is open only to retailers, so long as their turnover is not more than Rs 1 crore during the financial year.

Enforcement hurdles

The devil, however, lies in enforcement and collection. The services of the local government may have to be enlisted lest taxpayer apathy continues to bedevil the scheme. There is no reason why the presumptive tax scheme cannot be dovetailed with the Shops and Establishments Act or for that matter with electricity distributing authorities. Every establishment pays electricity bills willy-nilly, sooner or later, and there is no reason why the one hawking electricity should not be fastened with the responsibility to collect income tax as well. Fear of disconnection of power would make one cough up the tax as well.

But as with truckers, even small traders must be told in categorical terms what tax they have to pay instead of leaving it to them to compute the tax amount.

The USP of a presumptive tax scheme is it is final at the option of the taxpayer. But if he wants he can file a regular return and ask for refund if warranted. In other words, at his option, the presumptive tax can rank on a par with advance tax.

Without operation of presumptive taxation schemes suitably interlocked to ensure payment, there is no way the government can hope to broad-base income tax collections. The idea of annual information report, under which certain specified authorities are called upon to notify the income tax department like registrars when properties in excess of Rs 30 lakh are registered, mutual funds when investments in excess of the specified threshold are made, etc, is not bad.

Indeed, the government has registered a modicum of success from it than it did with the harebrained one-out-of-six economic criteria scheme under which one was mandated to file a return if he owned a car or phone among others even if he did not have any taxable income. But then these are one-time adversarial proceedings. What is required are presumptive taxation schemes that would broad-base tax collections in perpetuity. India like Britain is a land of traders, many of them doing roaring business with bulk of them giving the slip to the tax authorities. Collections from them intuitively will not be small.

Securities Transactions Tax

Unless the taxpayers' base is broadened, the burden would continue to fall on the sitting ducks i.e. the salaried class and corporates. It is not only the taxpayers' base that needs to be broadened but those who are borne on the register of the department must not be indulged with unmerited exemptions.

Come to think of it, tycoons do pay tax on rent and interest but not on their substantive income — capital gains and dividend. And this is the supreme irony. Securities Transactions Tax (STT) is an apology of a tax on those operating in the bourses though it has set the cash registers of the department ringing merrily. Horizontal equity demands that tycoons pay tax on a par with the salaried class in all decency. Gains from bourses need no indulgence any more than the redoubtable FIIs do.

(The author is a New Delhi-based chartered accountant.)

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