TAX NEWS - June 2010

India Tax: Mukherjee asks Income Tax Department to ensure tax compliance

Finance Minister Pranab Mukherjee today called upon tax officials to monitor those sectors of the economy which were performing well for tax compliance and make attempts to widen and deepen the tax base further.

Addressing the Annual Conference of Chief Commissioners and Directors General of Income Tax here, he urged them, in this regard, to improve utilisation of information relating to high value transactions available through Annual Information Returns (AIR), Central Information Branches (CIB) and other sources.

"Using multisource data, Department should refine risk profiling of taxpayers and assessments and investigations should be carried out accordingly. Using this intelligence data department should develop credible deterrence for taxpayers, who are habitual tax evaders," he said.

Mr Mukherjee noted that the direct tax collection target for the current financial year had been fixed in the Budget Estimates at Rs 4,30,000 crore, 13.7 per cent higher than the actual collection last year.

"We have deliberately called this conference in the beginning of the financial year to deliberate strategies and draw action plan to achieve this target," he said.

The Finance Minister said that, apart from concentrating on big cities and towns, the Department should also look to smaller towns and cities for widening of the tax base.

"The smaller towns and centres have emerged as centres of growth due to inclusive growth agenda of Government. Department may also develop special strategies to monitor TDS (tax deduction at source) compliance at the district level, state level and at Central level," he said.

He said direct taxes, now the major resource provider to the Central Government, had grown at an average annual rate of 24 per cent in the last five years and nearly trebled from Rs.1,32,771 crore in 2004-05 to about Rs.3,78,000 crore in 2009-10, increasing its share from 4.1 percent to 6.1 percent of the Gross Domestic Product (GDP).

He said this growth had been made possible not only due to rationalisation of tax structure and improvement in tax administration leading to better compliance, but also persistent and unrelenting efforts of employees of the Department.

Mr Mukherjee said that, to improve compliance further, tax laws needed to be simple, stable and robust; tax rates should remain moderate; and multiplicity of tax exemptions and deductions should be gradually phased out in order to widen and deepen the tax base.

"Tax administration needs to be further toned up by appropriate use of technology on the one hand, and improving professional competence and responsiveness of the employees on the other," he said.

He said the draft of the proposed Direct Taxes Code 2009 was under revision, taking into consideration the areas of concern expressed by various stakeholders, and the discussion paper would be shortly in the public domain before introduction in Parliament in the forthcoming monsoon session.

"It will indeed be legislation for the 21st century, which will witness the emergence of an economically strong and vibrant India. I anticipate that the new code will usher in major changes in procedures and practices of Direct Tax," he said.

Pointing to the new and complex challenges thrown up by growth in international trade and commerce, Mr Mukherjee said the Government had set up two Income Tax Overseas Units (ITOUs) within Indian Missions in Singapore and Mauritius to facilitate exchange of information.

Eight more such units in the United States, the United Kingdom, the Netherlands, Japan, Cyprus, Germany, France and the United Arab Emirates (UAE) are also being created on similar lines, he said.

"I am hopeful that these measures would result in seamless flow of tax related information from foreign tax jurisdictions and would strengthen our fight against menace of tax evasion using cross border transactions," he said.

Mr Mukherjee stressed the need for the IT Department to improve its infrastructure to match global standards of delivery of taxpayer services as well as to address their grievances relating to refunds and credit of TDS.

He suggested that the Central Board of Direct Taxes (CBDT) could consider hiving off its technology-driven taxpayer services to a Special Purpose Vehicle (SPV), which can better deliver such services in the public-private partnership mode.

He also stressed the need for better training, especially at the mid-career level for officers and announced that the Advanced Mid-Career Training Programme (AMCTP) for Indian Revenue Service (IRS) officers would be started during the current year.

Mr Mukherjee also announced the operationalisation of the Income Tax Welfare Fund, which was pending since 1998. The Fund has a corpus of Rs.100 crore kept in interest-bearing deposit. The interest earned annually on this deposit, and other annual accruals to the Fund, will be available for welfare activities of employees of the Income Tax Department, he added.