Time for restructuring the IT Department

A NEWS item indicates that restructuring of the Income Tax Department has been approved with a view interalia to improve its efficiency and effectiveness as well as to increase its productivity by inducting information technology through greater infusion of computers and allied tools. This is expected to result in improved services to tax payers and enable the smooth and efficient handling of the growing volumes of work with complex propensities.

The Reserve Bank of India's Annual Report on fiscal imbalance notes that the combined gross fiscal deficit of the Centre and the States in 1999-2000, exceeded the projections by 2.5 percentage points at 9.9 per cent giving rise to a concern that any further erosion of the fiscal position could turn out to be unreasonable. Over a long period, 1985-86 to 1999-2000, there has been a slowdown in revenue collections as indicated by a deterioration in the tax GDP ratio of the Centre and States together from 16.4 per cent to 14.1 per cent. It is therefore imperative that the tax rates must move up along with the pace of growth of the economy.

The RBI has therefore cautioned: ``the need for a turnaround in the fiscal position is well recognised, but it requires a multipronged effort at improving reserve buoyancy, in particular, tax collections.'' The decision of the Government at this juncture to restructure the Income Tax Department to improve among other things, its overall efficiency and effectiveness, is most opportune.

Over years, continuing tax evasion, further aggravated by the travails of money laundering, smuggling and trafficking in drugs has eroded the nation's vitals. Gone are the freedom days, when the nation imbued with a crusading spirit to regain its independence challenged a mighty empire. Why is it that the same ardour is not visible in the human psyche. Corruption has become a way of life. Sophisticated consumption and display of ostentation have become show pieces for gaining positions in the social ladder. Should not the Income Tax Department rightly step in to correct this distortion. Should not the Universities inculcate in the students, the quality of simple living and high- thinking?

One sees that a good portion of the Department's time is being spent in pursuing cases, when tax incentives have been wrongly claimed. While incentives, as a fiscal policy, generated growth and development in the twilight years following Independence, has not the time come now to take a hard look at these provisions and balance the illusory games against litigation and other costs as well as the formidable time spent in courts in resisting claims?

In 1954 the Income Tax Department, brought out books on how to examine accounts. Should these not be updated, taking into account the forays made by developments such as electronic commerce, so that assessing officers have a full grip over these, while examining acocunts. Should not refresher courses be mounted in the National College at Nagpur and other training Institutes in the Commissionerates to give an insight to the officers and the staff into the nature of the problems to be handled. Could not officers' capabilities be identified at the formative periods of their career, following the ASLI principle. (Assessment, Secretariat, Legislation, Investigation).

Following the Income Tax Investigation commission's Report, Bank cards collected by them were sent to the concerned Income Tax officers along with declarations under the High Denomination's Notes Demonetisation Ordinance of 1946. These in a way, could help the assessing officer to fine-tune his knowledge about the assessee and examine the accounts more critically. The 1978 Jha Commission Report, dealing with Indirect Taxes recommended massive automation, to deal with the growing numbers of information data, received from assessees, export houses and other agencies, so that they could be fused into the assessments of individual assessees. There is no dearth of similar information slips in the IT Dept. more popularly known as IT 93 slips.

The automation should make the ITO aware of the available information. Though there is a statutory requirement for assessees to file advance tax delcarations and pay taxes, it was noticed in a charge in 1978, that there was not the expected voluntary compliance. A sustained pursuit by a team of officers, at the Commissioner's level, had the effect of improving collections by nearly 25 per cent over the previous year's figures. The lesson to be learnt is that this is an area, which should receive prime attention. So also the follow up in regard to enforcement of collections, deducted at source by the payers. There have been several cases, where the payments on time, have either been deferred or not made at all.

Tax arrears are cluttering the register. Observance of tax arrears clearance weeks could motivate both the tax payers and the Department to update the Register and enable a more vigorous pursuit of collection. The figures are staggering. The old practice of mass communication drives, adopted in the U.S. and recommended by the Wanchoo Committee, could also help swerve the erring tax payee to the path of rectitude. Posh flats survey could also be taken up, as was done in 1975.

The then Finance Minister, the late T. T. Krishnamachari, had suggested in 1965 the setting up of a co-ordination committee of all Revenue Agencies under the Direct and Indirect Tax set ups, Directorate of Enforcement and CBI, at State and Central levels to pool and exchange information, so that the efforts made by one Department could be made available to others.

This could freshly assist in tackling evasion. Its role should be re-energised. The customs Study Team of 1968, recommended the posting of a few Revenue officers at high levels, in select foreign countries, so that the problem of evasion through smuggling could be tackled. Could not the IT Department also consider similar stages.

There should also be a continuing research at the apex levels to deal with the multifaceted problem of tax evasion. One cannot suggest an all time solution to deal with the growing complexities. The cloth has to be cut according to the evolving needs.

M. S. Sivramkrishna

(Former Member, Central Board of Direct Taxes)

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