Widening of the tax base, doing away with cess and surcharge, improvement in compliance and moderation in tax for emerging sectors are some of the suggestions submitted to the Finance Ministry ahead of the Budget by Think Change Forum (TCF).
Experts are of the opinion that there is a need to grow tax revenues for the government to drive economic growth and make investments in developmental activities, TCF, the think tank said in a statement.
Towards this end, poor compliance was identified as a weak link in achieving targeted collections leading to complex issues like overtaxing, complicated tax structures, rising litigation, among others.
Experts during the deliberation stressed on better compliance processes to be put in place backed by technological support which in turn will enable tax widening and need for strategies to strengthen tax collections from Tier 2 towns and cities to widen the tax net.
Participating in the debate, former chairman of Central Board of Indirect Taxes and Customs (CBIC) PC Jha said "enforcement agencies are working hard to check the illicit trade, but tax evaders are ahead of curve and using innovative techniques to smuggle goods into our country.
"There is a need to deploy modern technology, install more scanners at ports and use artificial intelligence to address the counterfeiting issue.”
Goods with higher profit margins like gold, tobacco and alcohol which are highly taxed, lead to tax evasion and smuggling.
As per a recent study, the estimated tax loss to the government in two highly regulated and taxed industries, tobacco products, and alcoholic beverages is over Rs 28,500 crore, he said.
Capacity enhancement programmes of enforcement agencies and the use of cutting-edge technologies will certainly create a sense of fear amongst those who wish to indulge in smuggling and tax evasion activities and curb the illicit trade, he added.
According to Sanjaya Baru, former media adviser to Manmohan Singh and Advisor, Think Change Forum, a large section of individuals escapes and avoids taxes without being punished for it.
"In India only a small percentage pays taxes.
"If we compare our Tax GDP ratio with other rapidly developing economies it is below par.
"We also need to leverage technology to cast the net wider and increase compliance.
"Predictibality in the taxation system is equally important to ensure compliance,” Baru said.
Moreover, Swapan Sarkar, Owner Sarkar and Associates said, Income Tax in India has several components other than the tax rate such as surcharge and cess.
"This is paid by individuals as well as corporates on top of tax paid on earned income.
"This increases the total tax payout which can go as high as 42 per cent in the case of individuals as the surcharge on individual taxation is around 10 to 35 per cent," Sarkar said.
He demanded that the Government should completely do away with cess and surcharge as it is responsible for an overall increase in direct tax payout and disturbs the federal structure of the country as well.
