Govt looks into tax data outsourcing

 

The finance ministry is examining the implications of transferring tax data of all assesses to a semi-government organisation for the computerisation of its database.

 

The ministry has set up an internal committee to examine the legal implications of the move to outsource non-core functions of the income-tax department.

 

The move involves creating a Tax Information Network to be operated by the National Securities Depository Limited.

 

The Tax Information Network, once operational, will also make it possible to do away with the one-by-six scheme of tax filing introduced by former Finance Minister Yashwant Sinha.

 

The task force on taxes, headed by Vijay Kelkar, adviser to finance minister, has in its consultation paper recommended that the Tax Information Network should receive the returns of tax deducted at source and other information in a digitized form on behalf of tax administrators.

 

The system could be networked with banks to allow refunds and doing away with tax deduction certificates.

 

At present, the computer network of the income-tax department is not equipped to handle on-line processing of the huge amount of data to be received from about 30 million taxpayers in the country.

 

The Kelkar

panel has recommended that given the experience of NSDL in handling data on share market transactions, it makes more sense to hand over the responsibility of tackling income tax data bank to it.

 

The Income-Tax department is expected to take back the operations by 2005, once the process of system upgradation is over.

 

The committee would also examine the modalities of such a step as it has several legal angles.

 

The committee will look into whether tax data, which by its nature is confidential, can be handed over to a private party.

NSDL is a joint sector company. Tax data from individuals and corporates contain a large amount of information, which by their very nature are classified.

 

There is also the question of security of data. Officials said they would ensure that the same was encrypted.

 

It is important because the revenue department is increasingly resorting to computer stored data for cases of investigation of unaccounted income.

 

If implemented, the system would completely change the working of the income-tax department, besides making another round of staff superfluous.

Revenue officials, however, said the experience of different countries have been mixed and it was difficult to draw any firm conclusion.