How the government plans to simplify the tax system

Ahead of the Budget 2016-17, Finance Minister Arun Jaitley on Monday said the government is looking into the recommendations of Parthasarathi Shome committee for simplifying tax administration.

"The Shome Committee report has given several recommendations which we are at a very advanced stage of looking into.

“It has suggested certain reforms in tax administration," he said addressing the Platinum Jubilee celebrations of Income Tax Appellate Tribunal in New Delhi.

Jaitley said a committee has also been set up under Justice R V Easwar to simplify the the Income Tax Act.

"Laws must be simple, so even if you have a large number of assessees and you have a large number of population, if your laws are simple, then the possibility of excessive litigation itself does not arise," Jaitley added.

Referring to his last Budget proposal of reducing corporate tax from 30 per cent to 25 per cent over 4 years along with removal of tax exemptions, Jaitley said it would make the tax system cleaner and simpler and will ensure that ‘oppressive taxmen does not hover over us’.

The Tax Administration Reform Commission, headed by Shome, had in its report pitched for a separate Budget allocation to ensure time bound tax refund and a passbook scheme for tax deduction at source.

It had suggested that retrospective amendments to tax laws should be avoided as a principle and Income Tax Return forms should also include wealth tax details.

Recommending far-reaching reforms in tax administration, the panel had suggested abolition of the post of Revenue Secretary, merger of CBDT and CBEC and broadening the use of Permanent Account Number.

The TARC submitted report to Jaitley in June 2014.

The Easwar Committee, in its draft report released last week, had recommended an across-the-board raising of threshold limits for TDS and halving of the withholding tax in most cases.

It also suggested a 12 per cent or 18 per cent interest on delayed refunds.

Jaitley said that once a simpler tax system comes into place, there will be fewer appeals and further efforts would be made to bring down arrears.

"I do hope that with all these changes, an improved performance in the tribunal which you are endeavouring to get, the arrears will be low, our tax buoyancies will be higher and the harassment to the assessee would probably be least," he said.

In recent months the government has taken a number of steps to make the system taxpayer friendly to reduce litigations and information technology has a very important role now in tax assessments.

"More and more returns are now online, the queries are being addressed online, the answers can come online, and therefore the human interaction in those assessments itself is coming down," he said, adding this will help in eliminating large number of corruption also the tax refunds have also gone online.

Jaitley said a citizen cannot be unfairly taxed, even though taxation serves a very noble purpose of enabling the state to carry on developmental activities.

He added: "Taxes which are payable are certainly payable and taxes which are not payable can never be levied.

"Nobody can come up and say that on grounds of compassion, exempt or liberate me from the responsibility of paying taxes. There is no place for compassion.

"At the same time, the plea that the state needs more money and therefore the taxation laws should be liberally construed in favour of state is also not a plea which is available."

Illustration by Uttam Ghosh/Rediff.com