<b>A K Bhattacharya:</b> Revenue headcount spike at odds with GST

With the staff strength of the revenue department increasing by 84 per cent in the last one year, questions are bound to be raised over its cost effectiveness

Guess which department of the Union government had the dubious distinction of seeing the biggest increase in its headcount last year? Not the police or the postal department, not even the railways. It was the revenue department, whose staff strength improved by a whopping 84 per cent at the end of March 2016, compared to what it was in the same month of the previous year.

From about 96,000 employees (mostly engaged in the business of tax collection) at the end of March 2015, the revenue department saw its manpower strength go up to about 177,500 by the end of March 2016. Among the big departments in the government, defence was the only other one that saw double-digit increase in the space of just one year with its civilian staff strength going up by 25 per cent from about 40,000 to over 50,000.
 

The manpower strength of the police department under the Union home ministry went up by just three per cent in this period. And the railways that has over 1.3 million employees, accounting for about a third of the total government staff strength, has not let its headcount increase at all. So if the total government staff strength went up by about six per cent last year, the revenue department certainly made the biggest contribution.

And it is this rise which now should come under scrutiny even as tax reforms gather pace. Remember that the efficiency and effectiveness of the revenue department employees in performing their basic function of collecting taxes are crucial for the government's fiscal management. So if the revenue department's staff strength goes up by 84 per cent in just one year, the obvious question that would arise is what gains the government has notched up as a result - whether by higher tax collections or improvements in tax administration.

Prime Minister Narendra Modi recently said that only about six per cent of the total direct tax collections are accounted for by the tax department's efforts and initiatives. The remaining share of taxes comes through tax deduction at source or routine filing of income-tax returns. So, questions are bound to be raised over the cost effectiveness of increased manpower strength in the revenue department. They assume greater significance now that the goods and services tax or GST is set to be introduced from next year.

Already direct tax simplifications have led to greater use of technology and should have resulted in manpower savings. If savings were not possible, then at least retraining and redeployment of existing staff in newer types of tax assessment and investigation procedures should have been planned. It is not clear if such plans were implemented because there is as yet no visible sign or impact of the use of advanced technology for tax collections. Instead of a reduction in the revenue department's staff strength, the overall manpower needs seem to have risen as seen in an increased headcount.

Even as the country gears up for the roll-out of GST from the coming financial year, it is of course important that such training and redeployment needs should be an area of priority action. While 60,000 indirect tax officers are now to be retrained for rolling out GST, it is puzzling that nobody in the government is as yet talking about the need to reassess the actual manpower strength of those who are responsible for indirect taxes.

One of the biggest positive outcomes of GST is that the new system reduces the scope for discretion and bureaucratic intervention. Not only will multiplicity of taxes become a thing of the past, even the number of tax rates will see a significant decline under the new regime. Moreover, the GST Network, the technology platform for ensuring payment of taxes and set-offs at various stages of production or the supply chain, will substantially reduce manual workload.

It is important for the government to recognise that a successful roll-out of GST would be critically dependent on trained revenue staff, who should not be worried over their changed roles under the GST regime. The goal of a national common market through GST will be difficult to realise if the revenue department officials are allowed to engage in a turf battle to protect and preserve their earlier jurisdictions and power.

GST and its smooth administration will of course need reskilling of the revenue staff. But more important will be a reduction in the revenue department's staff strength as the new taxation regime can do with fewer tax officers.