Keep taxmen in check

New I-T bill proposes for officials powers that could breach taxpayer privacy, lead to data misuse.

The new Income Tax Bill, introduced by Finance Minister Nirmala Sitharaman in parliament, promises to simplify and overhaul the existing law which dates back to 1961. The law needs updating and simplification, as many of its concepts, practices, and language have changed or need to be reconfigured.

The overhaul may also be considered as part of the process of amending or updating old laws the government had started some years ago. The minister said the basic structure of the law has been overburdened and the language has become complex because of the amendments made in the last many years.

She said the amendments have “increased the cost of compliance for taxpayers and hampered the efficiency of the direct-tax administration.” The new bill has been sent to a select committee for scrutiny.

The bill is much shorter than the existing law, with 23 chapters instead of 47, though it has more tables, sections, and schedules. Some portions have been restructured and some outdated provisions dropped. Several clauses have been consolidated while some ideas and expressions have been changed.

One notable change is the use of “tax year” in place of the expression “assessment year” which has always created confusion. An ordinary taxpayer may now be able to read and understand the law better. Confusion about the meaning of words and expressions has led to misinterpretations and litigation.

The government has claimed that it has sought to address taxpayers’ grievances by making the law lucid and easy to understand.

However, it has been observed that simplification has not addressed all the issues in the existing law. Provisions related to deductions, exemptions, and penalties are still complex.

The most serious problem with the new law is the expansion of tax authorities’ powers. It allows officials to access electronic records of taxpayers, including emails and social media accounts, for the sake of investigation. Taxpayers have to give the officials access codes to their computers during search operations.

While the rationale is to tackle tax evasion in the digital age, providing such powers to officials raises concerns about privacy and potential misuse. This is especially true when there is no strong data protection law and safeguards against violation of privacy rights in the country.

Computers are used to store not only financial data but also personal data which can be accessed and misused by the state or by the officials under the new law. Simplification and updating of provisions should not be used as an excuse for violation of citizen rights.

Parliamentary scrutiny must ensure that the law fosters trust in the tax system and there are strong safeguards for taxpayer rights.