Ar­bi­trary, Co­er­cive Pow­ers for Tax­men

Gov­ern­ment must guard against a tax­man raj

The Economic Times - - The Edit Page -

The com­po­nent of tax rev­enue slated to go up the most is per­sonal in­come tax. An­nex­ure III to the Bud­get speech lists out a num­ber of strong-arm mea­sures that would pre­sum­ably help the gov­ern­ment achieve this goal. To pre­vent a back­lash that would fur­ther dis­cour­age in­vest­ment, the gov­ern­ment must en­sure that tax­men use their new pow­ers with over­sight and ac­cord­ing to due process, and that their ac­tions would be amenable to swift re­dress, should the need arise.

The Bud­get has pro­posed sweep­ing pow­ers for tax­men to at­tach prop­erty, con­duct searches, call for doc­u­ments and de­ter­mine fair mar­ket value of as­sets. This goes against the tenet of a non-ad­ver­sar­ial tax regime, lead­ing to un­cer­tainty for in­di­vid­u­als and busi­nesses. Em­pow­er­ing tax of­fi­cers to pro­vi­sion­ally at­tach prop­er­ties in search cases could co­erce peo­ple into mak­ing dec­la­ra­tions, be­fore tak­ing le­gal re­course. And that is un­fair. Sim­i­larly, em­pow­er­ing ju­nior of­fi­cers to con­duct in­quiries and ex­pand­ing the scope of searches to cover any ac­tiv­ity done for a char­i­ta­ble pur­pose could mean rov­ing in­quiries. Tax of­fi­cers will not be obliged ei­ther to dis­close rea­sons for a search to an ap­pel­late tri­bunal, to main­tain con­fi­den­tial­ity. How­ever, search and seizures are blunt, ar­chaic tools of law en­force­ment, and bring back mem­o­ries of a bad pre-re­form past. In­stead, the need is for in­tel­li­gent data min­ing to cre­ate tax de­mands and with a solid proof of eva­sion and avoid­ance.

A mod­ern tax ad­min­is­tra­tion should min­imise the in­ter­face be­tween the tax depart­ment and the tax­payer. En­force­ment will en­tail some dis­cre­tion, but safe­guards must be in place to en­sure that it is not used ar­bi­trar­ily. This re­quires in­ten­sive train­ing of tax of­fi­cers, some­thing that was rec­om­mended by the Parthasarathi Shome com­mit­tee. The tax depart­ment should use big data an­a­lyt­ics by ei­ther hir­ing such firms or us­ing their tech­niques to mine in­for­ma­tion. The gov­ern­ment should also swiftly adopt the goods and ser­vices tax that cre­ates au­dit trails on value ad­di­tion across the in­come and pro­duc­tion chain to widen the tax base.

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