The demonetisation exercise announced by the PM on November 8, 2016, aimed to tackle the
problems... more The demonetisation exercise announced by the PM on November 8, 2016, aimed to tackle the problems of black money, fake currency, corruption, and terror funding. With time, more targets were added such as the creation of a cashless economy, curbing real estate prices, and broadening the taxpayer base. Although black money cannot be wiped out in a single stroke the shock effect of demonetisation clearly conveyed the Government’s determination to tackle the problem upfront. In the past, too, Governments have provided opportunities to citizens to disclose unaccounted incomes in return for pardons. Indeed, similar efforts to demonetise high value currency, aimed at the black economy were made in 1946 and 1978 but met with little success. The demonetisation of 2016 is expected to yield better results since there is almost 100% banking coverage; the introduction of a taxpayer identification number (PAN) and a citizen identification number (Aadhaar); more digital transactions, extensive computerisation in the banking sector and in government departments, especially the Income Tax department. The latter is equipped with the latest hardware and software and supported by competent officers. The authors acknowledge the stress that this sudden move put on the common man. The RBI’s Annual Report 2017, showed that 99 percent of the demonetised currency had found its way back to the banks suggesting first, that most black money in the Indian economy is not held as cash, and secondly, that the Income Tax department now has a large amount of financial database. The authors feel that the Department should use technology to compile 360-degree profiles of all citizens based on: (i) all transactional data received since November 2016, and (ii) the large amount of historical data and third-party information available. Action by the Government/Department should be based on proper data analysis since tax proceedings can be initiated till six years after March 2017. The paper also recommends that the Department act with a focus on the 'customer' and in a non-intrusive and taxpayer-friendly manner. _________ Keywords: demonetisation, black economy, digitisation, widening of taxpayer and tax base, corruption, cash in circulation, cash economy, formalisation JEL Classification: E26, E42, F52, H21, H26 Authors’ email: rajiva_singh@hotmail.com; bagchi.anandita@gmail.com
The paper highlights importance of data, data analysis and research for formulation of evidence b... more The paper highlights importance of data, data analysis and research for formulation of evidence based policy, law & administration. This cross country study highlights statistics brought out, data used, research and analysis carried out by various successful tax administrations (TAs). India’s efforts followed by the practices of some successful TAs provides a roadmap for Indian Tax Research and Analysis wing to undertake such initiatives. It broadly discusses the type of statistics maintained,analysis & research including Tax Gap studies, Regulatory Impact Analysis (RIA), market research & surveys carried out by various TAs. In India, some research is carried out by the department & private research bodies but very little is available in public domain. The study brings out how RIA is being used effectively across administrations for assessing the costs and benefits of various legislative and policy changes, schemes, programs and projects and to stress the importance of bringing such processes in public domain in order to maintain a transparent and an effective system. Though a lot of information/data is being collected by way of various tax and information returns, the same is not compiled and maintained and utilized in the desirable manner. There is a lack of proper utilization of data within our tax department. Lessons can be learnt from the practices of various tax administrations on the importance of maintaining a comprehensive database that help in generating statistics and trends and help in policy action. Based on experiences of other administrations, organizational set up of the multidisciplinary team of economists, statisticians, operational researchers, social scientists and IT and general professionals for the research and analysis units has been proposed for India. . To the best of knowledge, this is the first of its kind of an attempt to provide a guide of ‘how to do’ and ‘what to do’ in the area of Tax Data Analysis & Research.
India with a population of nearly 1.25 billion has a very low tax payer base of about 45 million.... more India with a population of nearly 1.25 billion has a very low tax payer base of about 45 million. This is less than 4 per cent of the total population but the number of return filers is still lower at 3 per cent. The chapter dwells into some national and cross country statistics to indicate that even though the number of taxpayers in the country has increased over the years but it still lies below its potential level. While acknowledging the initiatives that have been undertaken or are in the pipeline by the Income Tax Department (ITD) like presumptive taxation, TDS, TCS, AIR, STT, BCTT and a host of other initiatives including some of the latest steps taken by the incumbent government, it is also observed that, despite these steps, there are certain loose ends that remain to be addressed. Lack of comprehensive list of reportable transactions under AIR and CIB, lack of capacity in collection and utilization of data, lack of tax payer awareness, lack of uniformity in Rules relating to use of PAN especially for third party reporting and various other administrative problems remain. Global best practices of other tax administrations are discussed to recommend ways to address the gaps. This includes 1) taxpayer registration system as it is the foundation for any other initiative, 2) third party reporting, 3) data collation, matching and business analytics and 4) use of electronic cash registers. The purpose of this chapter is to highlight the narrow tax payer base in India in terms of the potential taxpayers who by law, economic and other evidence should be within the tax net. This is not an attempt to predict the exact numbers but gives an idea and an indicative approach for future work in this area. The approach of the report has a non- intrusive technology based focus on procedural, administrative and other changes in the Indian tax administration to widen the tax payer base.
Deals with problems of Indian tax administration, steps taken to improve taxation environment so ... more Deals with problems of Indian tax administration, steps taken to improve taxation environment so far and way forward for further improving the taxation environment to attract foreign direct investment in India.
Tax issues relating to international taxation, general anti-avoidance rules, retrospective amendm... more Tax issues relating to international taxation, general anti-avoidance rules, retrospective amendments and dispute resolution under direct tax laws
Born out of first of its kind series of discussions between tax officials and practitioners, Indi... more Born out of first of its kind series of discussions between tax officials and practitioners, Indian Tax Administration:A Dialogue identifies and addresses challenges facing Inda as it contemplates tax reforms. This volume gives detailed analyses of the organisational structure, computerisation and Taxpayer Information Services among others.
Amidst a deteriorating economic environment due to multiple factors, certain direct tax related d... more Amidst a deteriorating economic environment due to multiple factors, certain direct tax related developments during 2012 led to an outcry among the international investor community. US multinational enterprises (MNEs), by virtue of their large presence, joined this chorus, fearing major adverse consequences for the cost of doing business in India. While issues of permanent establishment and transfer pricing under international tax regimes have been a sore point for MNEs for some time, the introduction of the General Anti-Avoidance Rules (GAAR) and retrospective amendments of tax law in 2012 were seen as unprecedented and adversarial for business and industry. Although India’s tax policy and law is generally in line with that in other tax jurisdictions, its implementation is not in tune with the international best practices followed by successful tax administrations globally. The Indian government has since taken certain steps to soothe investor sentiment but a lot more needs to be done for India to become an attractive destination for investors in a highly competitive international environment. 1The author is a former Member, Central Board of Direct Taxes, Ministry of Finance, Government of India and Senior Consultant with Indian Council for research on International Economic Relations (ICRIER) 2The author is a Research Associate at the Indian Council for Research on International Economic Relations (ICRIER)
Indian Tax Administration is considered to be one of the most difficult in the world. This impres... more Indian Tax Administration is considered to be one of the most difficult in the world. This impression is based on fact that both the audit and appeal process are costly and time consuming. There is a strong impression that the tax administration does not trust the taxpayers and is adversarial. At the same time taxpayers also do not trust the tax administration to be fair and just. One of the main reason for the action of the administration is perceived to be pressure on the tax officers to meet the revenue collection target. By very nature tax administrations in every jurisdiction do have the responsibility to collect taxes and reduce tax gap in order to provide resources for their governments. Every tax administration ensures correct filing of return of income and payment tax and in the process carryout a review and audit (scrutiny) of returns to ensure correctness income is declared and taxes are paid. What is a matter of concern is that while in other jurisdictions number of audits (scrutiny) of returns is not this large and the audits do not result in filing of appeals with the judicial authorities. Bulk of the matter are settled at the administration level leaving few cases which gets escalated to appeal level. Moreover there is no strategy to manage disputes.
Every tax administration throughout the world collects taxes from its taxpayers in order to garne... more Every tax administration throughout the world collects taxes from its taxpayers in order to garner resources for the government’s public expenditure. Naturally, this process becomes easier for the tax administration if the taxpayers willingly and voluntarily comply with their obligations under the country’s tax code. In enhancing taxpayers’ level of voluntary compliance, three factors play a very important role – certainty about the tax to be paid (it relates to the ability to determine without any ambiguity, the tax payable on any transaction since ambiguity adds to the cost of compliance), the convenience to pay it (the means and methods using which the taxpayer can pay his share of tax to the government with minimum compliance cost), and the attitude of the tax administration which drives both of these (helpful, unobtrusive and non-adversarial). It is therefore an important responsibility of every country’s revenue body to provide relevant and easily understandable information to the taxpayers which would help facilitate paying of taxes, filing of returns and other activities by the taxpayers. As a corollary to this, improving information service delivery also becomes critical to boost the said voluntary compliance. In the realm of information service delivery, revenue bodies have realised that each category or group of taxpayers act or respond differently to their immediate tax environment as well as to the information that is provided by the revenue bodies. There is a need to carry out ‘taxpayer segmentation’ so that the diverse categories of taxpayers can be catered to accordingly. This chapter begins by explaining the gradual change in the attitude of TAs from ‘command and control’ to ‘voluntary compliance’ and also enumerates a few tax administrations as examples to show how the rights of the taxpayers are secured through taxpayers’ charters and bills of rights. It then moves on to state the necessity for revenue bodies to develop plans in order to achieve decided targets in a number of areas including increased taxpayer satisfaction and also elaborates the need to understand taxpayer behaviour and compliance attitudes by revenue bodies. The aim of this chapter is to see how information services are being provided by TAs to their taxpayers using traditional and new-age channels; and to bring out the best practices in those areas. It also attempts to show how TAs set targets for information service delivery, map performance against them and carry out surveys to gauge taxpayer satisfaction or taxpayers’ perception of the TAs. Towards the end, the essential nature of having dedicated, willing and knowledgeable staff and office/unit for dissemination of information to taxpayers is stressed on. The paper concludes with recommendations which the Indian tax administration could consider implementing in order to augment the provision of taxpayer information services to its tax-paying community.
Challenges of Indian Tax Administration is an attempt to adopt an uncomplicated approach towards ... more Challenges of Indian Tax Administration is an attempt to adopt an uncomplicated approach towards the understanding of various areas of tax administration. Often, issues such as tax revenue, compliance, number of taxpayers, and tax evasive activities have been addressed in other literature written on this subject. However, the approach has been different as little has been written about the procedural problems and difficulties affecting the system, logistical mismatches, and other gaps in everyday tax administration.
Salient Features
Comprehensive coverage of various topics of tax administration —from taxpayer information services, widening of taxpayer base, risk based audit for improved tax compliance, transfer pricing documentation requirements, transfer pricing methods and comparability adjustments, tax dispute resolution, tax debt recovery to tax data analysis. A novel enquiry, in the Indian context, into the administrative gaps that have been persistently viewed as complex, time consuming, and slow to address. Effort has been made to review tax administration related issues from two perspectives, i.e. as an insider of the Indian tax administration as well as an outsider (customer/taxpayer). Detailed cross-country comparisons and analyses. Issues in the efficient working of the Indian tax administration reviewed to their minutest and simplest details which are often overlooked in more complex studies. Attempt made to identify the root cause behind the inability to deliver optimum results and best practices which are working in successful tax administrations of other countries have been proposed. Throws light on a more effective implementation of such reforms through a ‘bottom-up’ approach and does not offer only simple policy prescription which flows ‘top-down’. The focus is to go beyond the much-written ‘what to do’ and ‘why to do it’ and lay down in simple terms non-adversarial and technology-based non-intrusive methods of ‘how to do it’.
The demonetisation exercise announced by the PM on November 8, 2016, aimed to tackle the
problems... more The demonetisation exercise announced by the PM on November 8, 2016, aimed to tackle the problems of black money, fake currency, corruption, and terror funding. With time, more targets were added such as the creation of a cashless economy, curbing real estate prices, and broadening the taxpayer base. Although black money cannot be wiped out in a single stroke the shock effect of demonetisation clearly conveyed the Government’s determination to tackle the problem upfront. In the past, too, Governments have provided opportunities to citizens to disclose unaccounted incomes in return for pardons. Indeed, similar efforts to demonetise high value currency, aimed at the black economy were made in 1946 and 1978 but met with little success. The demonetisation of 2016 is expected to yield better results since there is almost 100% banking coverage; the introduction of a taxpayer identification number (PAN) and a citizen identification number (Aadhaar); more digital transactions, extensive computerisation in the banking sector and in government departments, especially the Income Tax department. The latter is equipped with the latest hardware and software and supported by competent officers. The authors acknowledge the stress that this sudden move put on the common man. The RBI’s Annual Report 2017, showed that 99 percent of the demonetised currency had found its way back to the banks suggesting first, that most black money in the Indian economy is not held as cash, and secondly, that the Income Tax department now has a large amount of financial database. The authors feel that the Department should use technology to compile 360-degree profiles of all citizens based on: (i) all transactional data received since November 2016, and (ii) the large amount of historical data and third-party information available. Action by the Government/Department should be based on proper data analysis since tax proceedings can be initiated till six years after March 2017. The paper also recommends that the Department act with a focus on the 'customer' and in a non-intrusive and taxpayer-friendly manner. _________ Keywords: demonetisation, black economy, digitisation, widening of taxpayer and tax base, corruption, cash in circulation, cash economy, formalisation JEL Classification: E26, E42, F52, H21, H26 Authors’ email: rajiva_singh@hotmail.com; bagchi.anandita@gmail.com
The paper highlights importance of data, data analysis and research for formulation of evidence b... more The paper highlights importance of data, data analysis and research for formulation of evidence based policy, law & administration. This cross country study highlights statistics brought out, data used, research and analysis carried out by various successful tax administrations (TAs). India’s efforts followed by the practices of some successful TAs provides a roadmap for Indian Tax Research and Analysis wing to undertake such initiatives. It broadly discusses the type of statistics maintained,analysis & research including Tax Gap studies, Regulatory Impact Analysis (RIA), market research & surveys carried out by various TAs. In India, some research is carried out by the department & private research bodies but very little is available in public domain. The study brings out how RIA is being used effectively across administrations for assessing the costs and benefits of various legislative and policy changes, schemes, programs and projects and to stress the importance of bringing such processes in public domain in order to maintain a transparent and an effective system. Though a lot of information/data is being collected by way of various tax and information returns, the same is not compiled and maintained and utilized in the desirable manner. There is a lack of proper utilization of data within our tax department. Lessons can be learnt from the practices of various tax administrations on the importance of maintaining a comprehensive database that help in generating statistics and trends and help in policy action. Based on experiences of other administrations, organizational set up of the multidisciplinary team of economists, statisticians, operational researchers, social scientists and IT and general professionals for the research and analysis units has been proposed for India. . To the best of knowledge, this is the first of its kind of an attempt to provide a guide of ‘how to do’ and ‘what to do’ in the area of Tax Data Analysis & Research.
India with a population of nearly 1.25 billion has a very low tax payer base of about 45 million.... more India with a population of nearly 1.25 billion has a very low tax payer base of about 45 million. This is less than 4 per cent of the total population but the number of return filers is still lower at 3 per cent. The chapter dwells into some national and cross country statistics to indicate that even though the number of taxpayers in the country has increased over the years but it still lies below its potential level. While acknowledging the initiatives that have been undertaken or are in the pipeline by the Income Tax Department (ITD) like presumptive taxation, TDS, TCS, AIR, STT, BCTT and a host of other initiatives including some of the latest steps taken by the incumbent government, it is also observed that, despite these steps, there are certain loose ends that remain to be addressed. Lack of comprehensive list of reportable transactions under AIR and CIB, lack of capacity in collection and utilization of data, lack of tax payer awareness, lack of uniformity in Rules relating to use of PAN especially for third party reporting and various other administrative problems remain. Global best practices of other tax administrations are discussed to recommend ways to address the gaps. This includes 1) taxpayer registration system as it is the foundation for any other initiative, 2) third party reporting, 3) data collation, matching and business analytics and 4) use of electronic cash registers. The purpose of this chapter is to highlight the narrow tax payer base in India in terms of the potential taxpayers who by law, economic and other evidence should be within the tax net. This is not an attempt to predict the exact numbers but gives an idea and an indicative approach for future work in this area. The approach of the report has a non- intrusive technology based focus on procedural, administrative and other changes in the Indian tax administration to widen the tax payer base.
Deals with problems of Indian tax administration, steps taken to improve taxation environment so ... more Deals with problems of Indian tax administration, steps taken to improve taxation environment so far and way forward for further improving the taxation environment to attract foreign direct investment in India.
Tax issues relating to international taxation, general anti-avoidance rules, retrospective amendm... more Tax issues relating to international taxation, general anti-avoidance rules, retrospective amendments and dispute resolution under direct tax laws
Born out of first of its kind series of discussions between tax officials and practitioners, Indi... more Born out of first of its kind series of discussions between tax officials and practitioners, Indian Tax Administration:A Dialogue identifies and addresses challenges facing Inda as it contemplates tax reforms. This volume gives detailed analyses of the organisational structure, computerisation and Taxpayer Information Services among others.
Amidst a deteriorating economic environment due to multiple factors, certain direct tax related d... more Amidst a deteriorating economic environment due to multiple factors, certain direct tax related developments during 2012 led to an outcry among the international investor community. US multinational enterprises (MNEs), by virtue of their large presence, joined this chorus, fearing major adverse consequences for the cost of doing business in India. While issues of permanent establishment and transfer pricing under international tax regimes have been a sore point for MNEs for some time, the introduction of the General Anti-Avoidance Rules (GAAR) and retrospective amendments of tax law in 2012 were seen as unprecedented and adversarial for business and industry. Although India’s tax policy and law is generally in line with that in other tax jurisdictions, its implementation is not in tune with the international best practices followed by successful tax administrations globally. The Indian government has since taken certain steps to soothe investor sentiment but a lot more needs to be done for India to become an attractive destination for investors in a highly competitive international environment. 1The author is a former Member, Central Board of Direct Taxes, Ministry of Finance, Government of India and Senior Consultant with Indian Council for research on International Economic Relations (ICRIER) 2The author is a Research Associate at the Indian Council for Research on International Economic Relations (ICRIER)
Indian Tax Administration is considered to be one of the most difficult in the world. This impres... more Indian Tax Administration is considered to be one of the most difficult in the world. This impression is based on fact that both the audit and appeal process are costly and time consuming. There is a strong impression that the tax administration does not trust the taxpayers and is adversarial. At the same time taxpayers also do not trust the tax administration to be fair and just. One of the main reason for the action of the administration is perceived to be pressure on the tax officers to meet the revenue collection target. By very nature tax administrations in every jurisdiction do have the responsibility to collect taxes and reduce tax gap in order to provide resources for their governments. Every tax administration ensures correct filing of return of income and payment tax and in the process carryout a review and audit (scrutiny) of returns to ensure correctness income is declared and taxes are paid. What is a matter of concern is that while in other jurisdictions number of audits (scrutiny) of returns is not this large and the audits do not result in filing of appeals with the judicial authorities. Bulk of the matter are settled at the administration level leaving few cases which gets escalated to appeal level. Moreover there is no strategy to manage disputes.
Every tax administration throughout the world collects taxes from its taxpayers in order to garne... more Every tax administration throughout the world collects taxes from its taxpayers in order to garner resources for the government’s public expenditure. Naturally, this process becomes easier for the tax administration if the taxpayers willingly and voluntarily comply with their obligations under the country’s tax code. In enhancing taxpayers’ level of voluntary compliance, three factors play a very important role – certainty about the tax to be paid (it relates to the ability to determine without any ambiguity, the tax payable on any transaction since ambiguity adds to the cost of compliance), the convenience to pay it (the means and methods using which the taxpayer can pay his share of tax to the government with minimum compliance cost), and the attitude of the tax administration which drives both of these (helpful, unobtrusive and non-adversarial). It is therefore an important responsibility of every country’s revenue body to provide relevant and easily understandable information to the taxpayers which would help facilitate paying of taxes, filing of returns and other activities by the taxpayers. As a corollary to this, improving information service delivery also becomes critical to boost the said voluntary compliance. In the realm of information service delivery, revenue bodies have realised that each category or group of taxpayers act or respond differently to their immediate tax environment as well as to the information that is provided by the revenue bodies. There is a need to carry out ‘taxpayer segmentation’ so that the diverse categories of taxpayers can be catered to accordingly. This chapter begins by explaining the gradual change in the attitude of TAs from ‘command and control’ to ‘voluntary compliance’ and also enumerates a few tax administrations as examples to show how the rights of the taxpayers are secured through taxpayers’ charters and bills of rights. It then moves on to state the necessity for revenue bodies to develop plans in order to achieve decided targets in a number of areas including increased taxpayer satisfaction and also elaborates the need to understand taxpayer behaviour and compliance attitudes by revenue bodies. The aim of this chapter is to see how information services are being provided by TAs to their taxpayers using traditional and new-age channels; and to bring out the best practices in those areas. It also attempts to show how TAs set targets for information service delivery, map performance against them and carry out surveys to gauge taxpayer satisfaction or taxpayers’ perception of the TAs. Towards the end, the essential nature of having dedicated, willing and knowledgeable staff and office/unit for dissemination of information to taxpayers is stressed on. The paper concludes with recommendations which the Indian tax administration could consider implementing in order to augment the provision of taxpayer information services to its tax-paying community.
Challenges of Indian Tax Administration is an attempt to adopt an uncomplicated approach towards ... more Challenges of Indian Tax Administration is an attempt to adopt an uncomplicated approach towards the understanding of various areas of tax administration. Often, issues such as tax revenue, compliance, number of taxpayers, and tax evasive activities have been addressed in other literature written on this subject. However, the approach has been different as little has been written about the procedural problems and difficulties affecting the system, logistical mismatches, and other gaps in everyday tax administration.
Salient Features
Comprehensive coverage of various topics of tax administration —from taxpayer information services, widening of taxpayer base, risk based audit for improved tax compliance, transfer pricing documentation requirements, transfer pricing methods and comparability adjustments, tax dispute resolution, tax debt recovery to tax data analysis. A novel enquiry, in the Indian context, into the administrative gaps that have been persistently viewed as complex, time consuming, and slow to address. Effort has been made to review tax administration related issues from two perspectives, i.e. as an insider of the Indian tax administration as well as an outsider (customer/taxpayer). Detailed cross-country comparisons and analyses. Issues in the efficient working of the Indian tax administration reviewed to their minutest and simplest details which are often overlooked in more complex studies. Attempt made to identify the root cause behind the inability to deliver optimum results and best practices which are working in successful tax administrations of other countries have been proposed. Throws light on a more effective implementation of such reforms through a ‘bottom-up’ approach and does not offer only simple policy prescription which flows ‘top-down’. The focus is to go beyond the much-written ‘what to do’ and ‘why to do it’ and lay down in simple terms non-adversarial and technology-based non-intrusive methods of ‘how to do it’.
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problems of black money, fake currency, corruption, and terror funding. With time, more
targets were added such as the creation of a cashless economy, curbing real estate prices, and
broadening the taxpayer base. Although black money cannot be wiped out in a single stroke
the shock effect of demonetisation clearly conveyed the Government’s determination to tackle
the problem upfront. In the past, too, Governments have provided opportunities to citizens to
disclose unaccounted incomes in return for pardons. Indeed, similar efforts to demonetise high
value currency, aimed at the black economy were made in 1946 and 1978 but met with little
success. The demonetisation of 2016 is expected to yield better results since there is almost
100% banking coverage; the introduction of a taxpayer identification number (PAN) and a
citizen identification number (Aadhaar); more digital transactions, extensive computerisation
in the banking sector and in government departments, especially the Income Tax department.
The latter is equipped with the latest hardware and software and supported by competent
officers. The authors acknowledge the stress that this sudden move put on the common man.
The RBI’s Annual Report 2017, showed that 99 percent of the demonetised currency had found
its way back to the banks suggesting first, that most black money in the Indian economy is not
held as cash, and secondly, that the Income Tax department now has a large amount of financial
database. The authors feel that the Department should use technology to compile 360-degree
profiles of all citizens based on: (i) all transactional data received since November 2016, and
(ii) the large amount of historical data and third-party information available. Action by the
Government/Department should be based on proper data analysis since tax proceedings can be
initiated till six years after March 2017. The paper also recommends that the Department act
with a focus on the 'customer' and in a non-intrusive and taxpayer-friendly manner.
_________
Keywords: demonetisation, black economy, digitisation, widening of taxpayer and tax base,
corruption, cash in circulation, cash economy, formalisation
JEL Classification: E26, E42, F52, H21, H26
Authors’ email: rajiva_singh@hotmail.com; bagchi.anandita@gmail.com
1The author is a former Member, Central Board of Direct Taxes, Ministry of Finance, Government of India and Senior Consultant with Indian Council for research on International Economic Relations (ICRIER) 2The author is a Research Associate at the Indian Council for Research on International Economic Relations (ICRIER)
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Books
Salient Features
Comprehensive coverage of various topics of tax administration —from taxpayer information services, widening of taxpayer base, risk based audit for improved tax compliance, transfer pricing documentation requirements, transfer pricing methods and comparability adjustments, tax dispute resolution, tax debt recovery to tax data analysis.
A novel enquiry, in the Indian context, into the administrative gaps that have been persistently viewed as complex, time consuming, and slow to address.
Effort has been made to review tax administration related issues from two perspectives, i.e. as an insider of the Indian tax administration as well as an outsider (customer/taxpayer).
Detailed cross-country comparisons and analyses.
Issues in the efficient working of the Indian tax administration reviewed to their minutest and simplest details which are often overlooked in more complex studies.
Attempt made to identify the root cause behind the inability to deliver optimum results and best practices which are working in successful tax administrations of other countries have been proposed.
Throws light on a more effective implementation of such reforms through a ‘bottom-up’ approach and does not offer only simple policy prescription which flows ‘top-down’.
The focus is to go beyond the much-written ‘what to do’ and ‘why to do it’ and lay down in simple terms non-adversarial and technology-based non-intrusive methods of ‘how to do it’.
problems of black money, fake currency, corruption, and terror funding. With time, more
targets were added such as the creation of a cashless economy, curbing real estate prices, and
broadening the taxpayer base. Although black money cannot be wiped out in a single stroke
the shock effect of demonetisation clearly conveyed the Government’s determination to tackle
the problem upfront. In the past, too, Governments have provided opportunities to citizens to
disclose unaccounted incomes in return for pardons. Indeed, similar efforts to demonetise high
value currency, aimed at the black economy were made in 1946 and 1978 but met with little
success. The demonetisation of 2016 is expected to yield better results since there is almost
100% banking coverage; the introduction of a taxpayer identification number (PAN) and a
citizen identification number (Aadhaar); more digital transactions, extensive computerisation
in the banking sector and in government departments, especially the Income Tax department.
The latter is equipped with the latest hardware and software and supported by competent
officers. The authors acknowledge the stress that this sudden move put on the common man.
The RBI’s Annual Report 2017, showed that 99 percent of the demonetised currency had found
its way back to the banks suggesting first, that most black money in the Indian economy is not
held as cash, and secondly, that the Income Tax department now has a large amount of financial
database. The authors feel that the Department should use technology to compile 360-degree
profiles of all citizens based on: (i) all transactional data received since November 2016, and
(ii) the large amount of historical data and third-party information available. Action by the
Government/Department should be based on proper data analysis since tax proceedings can be
initiated till six years after March 2017. The paper also recommends that the Department act
with a focus on the 'customer' and in a non-intrusive and taxpayer-friendly manner.
_________
Keywords: demonetisation, black economy, digitisation, widening of taxpayer and tax base,
corruption, cash in circulation, cash economy, formalisation
JEL Classification: E26, E42, F52, H21, H26
Authors’ email: rajiva_singh@hotmail.com; bagchi.anandita@gmail.com
1The author is a former Member, Central Board of Direct Taxes, Ministry of Finance, Government of India and Senior Consultant with Indian Council for research on International Economic Relations (ICRIER) 2The author is a Research Associate at the Indian Council for Research on International Economic Relations (ICRIER)
Salient Features
Comprehensive coverage of various topics of tax administration —from taxpayer information services, widening of taxpayer base, risk based audit for improved tax compliance, transfer pricing documentation requirements, transfer pricing methods and comparability adjustments, tax dispute resolution, tax debt recovery to tax data analysis.
A novel enquiry, in the Indian context, into the administrative gaps that have been persistently viewed as complex, time consuming, and slow to address.
Effort has been made to review tax administration related issues from two perspectives, i.e. as an insider of the Indian tax administration as well as an outsider (customer/taxpayer).
Detailed cross-country comparisons and analyses.
Issues in the efficient working of the Indian tax administration reviewed to their minutest and simplest details which are often overlooked in more complex studies.
Attempt made to identify the root cause behind the inability to deliver optimum results and best practices which are working in successful tax administrations of other countries have been proposed.
Throws light on a more effective implementation of such reforms through a ‘bottom-up’ approach and does not offer only simple policy prescription which flows ‘top-down’.
The focus is to go beyond the much-written ‘what to do’ and ‘why to do it’ and lay down in simple terms non-adversarial and technology-based non-intrusive methods of ‘how to do it’.