Just a day before India woke up to her 74th Independence Day, Prime Minister Narendra Modi announced the initiation of the Transparent Taxation platform. The platform will be used to carry out faceless tax assessments, appeals, and cater to the taxpayer’s charter. The latest developments present to us a lot of significant updates in the area of tax administration reforms in the country.
There are two things when we talk about tax reforms. Tax Policy and Tax Administration. While tax policy and design are present in the system to ensure the responsiveness of potential revenue to the overall economic growth, tax administration focusses more towards securing potential tax revenues efficiently. Although both these principles are two very different concepts, they are inextricably linked, and therefore, a reform in tax administration is as important as in tax policy.
The introduction of a taxpayer’s charter can be interpreted as a recognition and acknowledgment of the rights of the taxpayer by the Indian government. In a lot of counties, these rights have been codified into laws while in some others, they have been, in a very detailed way, explained in the tax administration documents. India’s new taxpayer charter holds the possibility of providing an outright statement of the tax administration’s promise to the taxpayers of the country. It will also highlight the expectations that the tax administration has from the taxpayer. In a nutshell, the taxpayers will be privileged with a right to choose their representatives in the system, register complaints and disputes, and use the redressal mechanism to get quick and swift solutions to their problems.
Mr. Narendra Modi also gave us a little insight into the measures taken by his government in the previous years to create a non-adversarial tax administration. He emphasized on the fact that the credibility of the tax administration of a country greatly depends on the credibility of its dispute resolution machinery. The quality of the tax administration also is influenced by the ability to ensure that avoidable disputes are decreased to the minimum and if any exist, they aren’t prolonged.
To achieve such fine mechanisms, it becomes imperative to have clarity in the laws and adoption of a fair and collaborative approach towards the disputes faced by the country’s taxpayers.
Coming back to the Transparent Taxation platform, if we talk about the measures that are set into action with the onset of this system, a directive has been put into place that will take away powers of a regular assessing officer to conduct surveys and will restrict such powers to only the investigation and tax deducted at source wing segment, and that too will only happen, after a proper authorisation from a senior official of director general or principal commissioner rank.
The Indian Industry experts welcomed the entire initiative with their arms wide open. A lot of them suggest that this move will minimise a lot of grey areas and eliminate the ‘jugaad’ factor which is extremely prevalent in the Indian Tax System. The move will make the entire process transparent and will push India towards a more competitive economy, especially in this highly dynamic scenario where the global economic order is changing and improving every day.
Tax administrations have generally been the ones who are the regulator as well as the enforcer of tax laws. The Transparent Taxation platform is aimed to achieve a better relationship between the administration and the taxpayer, and to make the tax policies in the future more user friendly. The current number of regular taxpayers in the country is extremely low as only 1.5 crore people pay their taxes. This indicates that India requires tax reforms in the form of reduction in tax rates and simplification of the direct tax laws. Since 2014, there have been regular efforts being made at revamping and refurbishing the tax administration in the country.
The launch of this particular platform accelerates the journey of tax reforms in India and pushes us towards being a country where the tax system is understood by every citizen of the country, thereby ensuring that more and more people pay their taxes regularly and contribute towards higher tax revenues.
“When the life of an honest taxpayer of the country becomes easy, they move forward and develop, then the country also develops and leaps forward.” – Prime Minister Narendra Modi, August 2020.
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