ADB to aid FinMin in toning up tax admin

Asian Development Bank (ADB) is likely to provide technical assistance for toning up tax administration in the country from September.

The technical assistance from ADB would cover both Central Board of Direct Taxes and Central Board of Excise and Customs, official sources said today.

The steering committee set up after budget by Finance Minister P Chidambaram to look into the tax matters has suggested that ADB could be roped in for this purpose.

Chidambaram had earlier stated that tax rates should be moderate, procedures made user-friendly and enforcement should be strict.

Sources said ADB will look into various aspects of tax administration so as to improve collections.

The tax collections could be scaled up to a great extent if government brings in improvement in areas like assessment, recover arrears, inflict penalties on tax evaders and reduce the cost of collection, sources said.

In case of direct taxes, for instance, the cost of collection was as high as 2.37% for income tax and 0.21% for corporate tax. The government spends close to Rs 3,800 crore for direct tax collection.

The arrears of tax demand is also astronomically high. The total tax demand amounted to over Rs 1,93,106 crore as on 2003-04, which is more than the fiscal deficit of that year, sources said, adding of the total demand the tax authorities could not collect Rs 88,017 crore worth of revenue.