World Bank urges tax reforms to improve collection

Rajasthan has increased its commercial (sales) tax revenue by 1.5 per cent of gross state domestic product (GSDP) over the past five years registering an average nominal growth of 15 per cent per annum with few administrative reforms, says a recently published report on 'state fiscal reforms in India' by the World Bank (WB).

A large part of credit goes to administrative reforms like using of checkpost for document collection, and streamlining systems, says the report.

Rajasthan is the first state to succeed in giving all registered dealers nationally-compatible tax identification number (TIN) which has helped in monitoring tax revenue in a daily basis.

With the help of established computer connectivity down to the circle level, new dealers were even given TIN within 24 hours, said the report.

Along with this, the formats of sales tax forms regarding registration, exemptions, returns have been simplified and put on the net, accelerating the revenue collection process.

The commercial tax department (CTD) was aiming to introduce information technology (IT) based risk audit, of only upto five per cent dealers in the next year.

The state's CTD has already set up special structure for 90 big taxpayers who contribute over 50 per cent of the revenues collected by the CTD, with an additional commissioner heading this wing. The department also tracks dealers with tax payment in excess of Rs 100 million a year, on a special basis. The number of such dealers is around 1200, showed the report.

In order to reduce corruption, improved taxpayer services and rewards for compliance have been adopted by the CTD.

It has moved in the direction of reducing the interaction between tax officials and tax payers. The World Bank claimed that tax administration reforms were probably more important than tax policy reforms but had till date received relatively less attention.

According to the World Bank, further activities on major areas like accountability, non-tax revenue retention, development of citizen feedback, reforms of the revenue department structure, modernisation of field enforcement and checkpost systems, inter-jurisdiction revenue co-ordination, development of tax policy and forecasting capacity could be enormously beneficial to the state.

The report cited cases where tax reforms related to sales tax and stamp duties in states like Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu had led to improved taxpayer compliance in the long run.