One of the biggest impediments in India’s growth story has been the fear of tax terrorism and harassment by taxation officials. The Modi government has always pursued the goal of freeing the growth of Indian businesses from the looming threat of tax terrorism.
Now, the second budget of the Modi government seems to have taken a historic step in the right direction, even as the Union Finance minister Nirmala Sitharaman has proposed a Taxpayers’ Charter in the Income Tax Act.
The proposal seeks to counter the issue of harassment of honest taxpayers by tax officials. It seeks to ensure fairness to all assesses and that the tax officials do not end up harassing citizens in their quest to collect taxes.
Sitharaman said, “An important aspect of ease of living and ease of doing business is fairness. Businesses should have the confidence that things are fair and that the tax administration is efficient. We wish to enshrine a taxpayers’ charter in the statute. Our government would like to reassure taxpayers that they will not be harassed. Tax harassment cannot be tolerated when we speak about wealth creation.”
In fact, a slew of measures have been announced in order to usher in a more tax-friendly regime. One of such steps being to amend the Income Tax Act in order to allow faceless appeals. Another significant step that has been taken in the Budget today is the introduction of new direct tax settlement scheme, namely, Vivaad se vishwas scheme as the government aims to undertake a massive trust-building exercise in its taxation regime.
Another major step has come in the form of an increase in turnover threshold for audit of MSMEs from the present Rs. 1 crore to Rs. 5 crores. This will be applicable to those companies that carry out less than 5 per cent is their business in cash. With this step too, the government is trying to move towards bringing an end to the era of avoidable assessments, audits and other such processes.
It is relevant to mention here that the issue of tax terrorism characterised by an overzealous, coercive taxation regime traces its origins to the colonial era. The ultimate objective of the colonists was obviously extraction of the highest possible tax revenue, and not to ensure uninhibited growth of the businesses. Our objects changed after the colonial era came to an end and also after the economic reforms in 1991.
But for decades, the issue of tax terrorism and harassment of citizens in the garb of tax collection remained largely unaddressed. It is perhaps for the first time that a Union Budget has directly combated Taxtortion.
In fact, the movie is largely in line with PM Modi’s focus on removing the fear of tax terrorism from the minds of the Indian businesses.
In fact, last year in an interview with Economic Times, the Prime Minister had said, “it is a fact that some black sheep in the tax administration may have misused their powers and harassed taxpayers, either by targeting honest assesses or by taking excessive action for minor or procedural violations. We have recently taken the bold step of compulsorily retiring a significant number of tax officials, and we will not tolerate this type of behaviour,” thus assuring the ordinary citizens about how the government is serious about dealing sternly with tax officials that harass honest taxpayers.
Again during his Independence Day speech, he had promised to crack the whip on “black sheep in the tax administration”. And the Modi government has not disappointed either. There were multiple rounds of compulsory retirements in the tax administration last year, with the object of cleansing the bureaucracy of tainted officials at the top level.
If 2019 was about giving a loud and clear message to the tax administration that harassment in the name of tax collection won’t be tolerated, 2020 seems to institutionalise such reforms.
With the introduction of a Taxpayers’ Charter, the era of tax terrorism might have just given way to a more friendly and efficient taxation regime.
