 "Finance ministry may veto Shome recommendations on revenue boards")
The Tax Administrative Reforms Commission (TARC), in its report to the ministry, has suggested subsuming Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) in a common Tax Policy and Analysis unit. It said the post of revenue secretary is superfluous.
A ministry official, however, said the same recommendation was made in 2011 too by Shome as well as then Law Minister M Veerappa Moily, but it was squarely rejected by the ministry.
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“Unlike advanced countries, India has a small taxpayer base. The UK model cannot be applied to India because of complications of tax structure. It is neither feasible nor desirable to merge the two boards. The proposal had been made and rejected in the past,” said an official, who did not wish to be identified.
Finance ministry officials also said abolishing the post of revenue secretary is not feasible as he has the broader vision and perspective while framing tax policies. According to officials, changing the target in line with economic growth is not possible as tax collections always come with a lag effect. Besides, they argue, in comparison to OECD countries “which have saturated tax base and everything is predictable”, in India it can happen only when tax base improves.
“You can't keep changing it every now and then. We do one review at the time of Revised Estimates. Frequent changes will only cause confusion and if revenue collections decline people will justify it saying the economy was not doing well. Tax officers will take shortfall as normal,” said another official.
The Shome panel pointed out that a static target adversely affects tax officers’ equilibrium as blind revenue targets cause unjust pressure on good taxpayers and all modern administration have moved away from that.
“Instead, the Boards pressure chief commissioners, who pressure commissioners, who pressure lower level officers to meet fixed revenue targets, irrespective of the prevailing condition of the economy,” the TARC report said.
Officers complained bitterly during TARC’s consultations in the five metros about the anxiety that they go through on account of the revenue collection pressure and some even went to the extent of pointing to the need for mentoring, coaching and psychological support, it added.
Some customer-centric recommendations of TARC such as pre-filled tax forms, a common return for income tax and wealth tax, and the permanent account number (PAN) as common business identification number might be accepted.
“The emphasis that TARC places on customer focus by noting best practices in tax administrations is indeed sweet music for taxpayers. The entire report has some great suggestions on the approach by revenue officials, the need to empower them to take decisions and calls for a change in the mindset of the revenue in terms of collection and gathering revenue,” said N C Hegde, partner, Deloitte.