PM Modi asks taxmen to use data analytics to track undeclared wealth

Said 50-year-old tax laws and procedures needed to change with the times

Prime Minister (PM) Narendra Modi said there was a need to overhaul the old tax structure on Friday at a gathering of top-level income-tax (I-T) officials on Friday, as the existing tax laws are over 50 years old and do not fit in with today’s environment and present economic situation. 

Modi is backing a major change in the system, which could change the entire tax department’s strategy to nab tax evaders.

According to sources, the PM, in an hour-long speech at Rajasva Gyan Sangam in New Delhi addressing direct and indirect tax officers, highlighted the several defects in the present tax system. He is learnt to have said there was huge distrust between taxpayers and the tax collector, which was an unpleasant situation. He asked the tax department to build a system where there would be no “I-T raids”. He questioned the tax system and asked why India had a system where people came under the tax net after demonetisation, or when properties were confiscated, or shell companies were found. 

Modi suggested several measures for better tax administration. In his speech, Modi expressed displeasure over exhaustive allocation of resources into search, seizure and scrutiny of tax evaders. He objected to the fact that 90 per cent of resources were being utilised for scrutiny, which only accounted for 9 per cent of the tax collection. “Ninety per cent of the collections come from advance tax, while huge resources are spent to collect the balance,” an I-T official, who attended the meeting, explained.

The PM said tax officials would need to do more to make use of the information technology to carry out their work. He asked tax officials to reduce the human interface between assessees and the tax department. He said that the department’s queries should be done through video conferencing. He suggested that taxmen experiment with it in 100 cities and towns over the next one year, and make it a practice subsequently.

He urged officials to reduce the human interface and enhance the usage of e-assistance or e-nivaran (an online portal for taxpayers to get tax-related and permanent account number-related grievances redressed by using this facility). 

Sources said he emphasised on technology and that computerisation of data would reduce corruption. Taxmen have computerised the mode of selection of cases, which could be taken up for scrutiny. To make the system more effective, Modi asked them to upload details of the officer concerned who was conducting the scrutiny on the system. This would make it transparent and bring better accountability. 

“The rationale behind the suggestions was to simplify tax laws and processes in the current situation. The PM wants the tax structure to be designed in a clear way and cut down litigation,” said a tax official, who attended the meeting.  Citing the 275,000 tax appeals which are pending so far, he directed the I-T department to prepare an action plan to reduce this pendency in a time-bound manner. According to the PM, the absence of litigation would improve the level of trust among taxpayers and would also remove the element of uncertainty. 

He also said on Twitter: “Urged officials to solve pendency tax-related cases in adjudication and appeal.” He also asked tax officials to use data analytical tools to proactively track and determine undeclared income and wealth.  

Acknowledging the pendency issue, the Central Board of Direct Taxes chairman assured that the tax department had a plan to tackle it, and was aiming to reduce it by around 70 per cent this year.

The PM also reposed faith in his belief that voluntary compliance would result in higher revenues for the government.

        PM to Taxman

•  Identify defects in the present tax system
• There should be a raids-free tax society
• Reduce the huge resources being allocated for scrutiny
• Scrutiny cases account for only 9% of tax collection
• Questioning, scrutiny of assessee should be done via video conferencing