No taxation without representation

I guess it took us long to understand and I reckon, it could be longer to embrace the concept. Dr Kelkar8217;s task force 8216;KTF8217; identified taxpayers8217; grievances as an integral part of the enforcement strategy of any tax administration.

Historical baggage and the imperatives

It is a universal fact that most human beings want to run away from the tax man. This is further compounded by the fact that as a country with a population of over a billion, we have a dismally low taxpayer base. We heard Finance Minister Chidambaram in his Budget speech talking about 1.7 crore taxpayers being left out of the tax net from a total of over 3 crore as a result of tax rebate on income up to Rs 1 lakh! Immediately thereafter, a parliamentary committee last week questioned the Finance Ministry for fall in the tax to GDP ratio to 9.2 per cent in 2003-04 from 10.1 per cent in 1990-91. It expressed grave concern over the low ratio.

Understandably, the historical role of the tax administration has been to enforce tax laws by focusing on tax collections and paying least attention to serving the taxpayer. Matured tax jurisdictions have significantly higher spends as compared to less than 2 per cent of annual budget for India towards taxpayer services.

It is an acknowledged fact by various expert committees that taxpayer services will aim at encouraging and facilitating voluntary tax compliance, which in turn will facilitate effective and efficient tax administration.

Indian citizens8217; experience

The philosophy for taxpayer services has been enshrined in the citizen8217;s charter hosted by the Income Tax Department website. The charter is simple, whereby the Government seeks:

8226; To be fair

8226; To be efficient

8226; To be helpful, and in turn the Government expects taxpayers to be prompt, honest and accurate besides of course paying taxes in time

On visiting the Income Tax Department8217;s web page, I discovered we have made significant progress since making presentations to the KTF in July 20028212;besides the modern look, the web page has useful information for citizens on procedure to process Permanent Account Number 8216;PAN8217; online and filing of Tax withholding Returns via the Net eTDS. Besides this, the most welcome change is a simplified procedure for payment of taxes, 8216;Online Tax Accounting System8217; 8216;OLTAS8217;, from June 1, 2004. The most important question is: Is this all we mean when we talk of 8216;taxpayer services8217;?

Kelkar8217;s recipe:Ab Delhi door hai

The recommendation is to have three institutions to speed up redressal of taxpayer grievances and a national tax tribunal with 50 additional branches of the tribunal. The Cabinet recently observed, 8216;Although there are several public grievances redressal cells existing in all offices of the I-T Department, it is gathered that they do not provide comfort to the general public8217;. The KTF has recommended that four metros should be initially covered and either a retired secretary to the Government of India or a serving additional secretary-rank officer should preside with a two-year term and his/her responsibility will be to report to the Revenue Secretary. It is known that most grievances are in relation to delays in tax refunds and there is a need to comprehensively review the present refund mechanism.

My view is that we need legislation to back taxpayer services, otherwise such services would be ineffective. Our revenue officials have to move away from 8216;Enforcement-oriented mindset8217;.They need quality infrastructure supported by adequate allocation of monetary and manpower. Last but not the least, training, knowledge building and soft skills are crucial. I better stop here, lest readers think I8217;m recommending consultants!

International experience

The Inland Revenue Services IRS of the United States of America, besides having an interactive web page, provides information to various taxpayers on the status of their tax filings and refunds. The most important aspect is legislative enactment of the Tax Payers8217; Bill of Rights, which provides for a tax ombudsman, 8216;National Taxpayers8217; Advocate8217;. Besides identifying and resolving taxpayers8217; problems, it has an annual obligation to report to the legislative body. The report covers 20 most serious tax problems, recommendations from taxpayers and action taken by the advocate. The advocate also provides assistance in controversies to those taxpayers who do not speak English as a first language.

The UK Inland Revenue has a wide network of publications on various tax matters. Its enquiry centres are spread across the country with national and local helplines to cater to various types of taxes, taxpayers and professionals. The Office of the UK Parliamentary Ombudsman can investigate action taken by any government department and there are procedures to deal with misleading advice.

Australia8217;s taxpayer charter, supported by legislative enactment, makes it legally binding for the tax administration to provide taxpayer services.

The move in India seems to be in the right direction. The challenge of course would be the thinking process between policy-making mandarins in the North Block and officials at the field level.

The writer is a leading chartered accountant and former national tax director of Ernst 038; Young, India. These are his personal views