Sunil Jain: Inefficient taxman

PERSPECTIVES

Though the country's tax collections are rising by leaps and bounds, a recent paper in the Economic & Political Weekly suggests this may have more to do with the growth in the economy than with the efficiency of tax administration. The study has been done by Sanjay Kumar (an IRS official), AL Nagar and Sayan Samanta (the latter two are at the NIPFP). The trio construct a tax enforcement index for both income tax and corporate tax, and that shows a slow hike. The study has some interesting facts, apart from the index itself. So, for instance, 'stop-filers' account for around a tenth of the total tax base; tax arrears have risen from Rs 22,928 crore in 1995-96 to Rs 98,612 crore in 2005-06, and just around 8 per cent of this is recovered "" the proportion hasn't changed in a decade (80 per cent of this is accounted for by 200 taxpayers!); just around half of income tax and corporate tax collections are in the form of TDS and advance tax (which are voluntary tax payments) and around a fifth comes from the detailed assessment process; in 2003-04, more than a fifth of those who paid TDS did not file their returns! The only caveat to the tax enforcement index is that it does not look at the most recent years, where the tax surge has been the highest, perhaps due to the unavailability of detailed information in this period. If this were to be done, the results would be even more interesting.