Transparent taxation initiative welcome

The launch of a platform — Transparent Taxation: Honouring the Honest — by Prime Minister Narendra Modi last week is the latest in the government’s measures intended to improve tax compliance and to make the process simpler and more comfortable for the taxpayer. The new initiative involves faceless assessment and appeals and a taxpayers’ charter. They are intended to bring about transparency in the taxation system and empower taxpayers. Faceless assessment and the taxpayers’ charter came into force last week; faceless appeals begin from September 25. India’s taxation system, especially the direct tax regime, has been considered complex, corrupt and inefficient, with arbitrariness on the part of officials and ignorance and even dishonesty on the part of taxpayers contributing to the system’s ills. It is expected that the new measures will help both the taxpayer and the government.

Faceless assessment entails removing direct interaction between income tax officials and taxpayers through features such as the random selection of taxpayers and the removal of officials’ territorial jurisdiction. The taxpayers’ charter, which has statutory sanction, is a list of guidelines for the department and taxpayers which detail the rights and responsibilities of both taxpayers and officials. They include honesty, courteous and reasonable treatment and a fair and impartial mechanism for appeals and review. The charter also mandates provision of complete and accurate information, collection of correct amounts of tax and respect for privacy and maintenance of confidentiality. These are important in any interaction between the government and the citizens but are especially important in matters related to tax collection.

Tax reform measures have often failed in the country for various reasons. The rules and regulations are too many and complicated. They still are. Many reform measures were not implemented properly because of vested interests. The system often did not encourage free functioning of officials and incentivise honesty on the part of taxpayers. The new initiative aims to address these and other entrenched problems with new methods and processes and with the use of technologies like machine learning and artificial intelligence. Tax officials will have to be trained and motivated to adopt the new system and taxpayers will have to be informed and educated on it. Barely 1% of the population pays taxes in the country. A better approach to taxation will bring more people into the tax net. The new processes should be given a serious and sincere push, though there are many odds against them.