Tuesday, December 23, 2014
Taxation & the Reforms: Speed is Essence
Under unavoidable compulsions, the tax reforms have to enter the next phase, since the whole tax structure, as commonly known is still not flawless. So, the government must include various stakeholders in its ambit, to make tax reforms truly thriving on the ground.
Next, the irrational complexities of tax laws in India are jeopardising the potential utilisation of the services. Precisely, the modern days law-making is bereft of practical purposes and not making life simpler for citizens. Apropos to the plethora of existing issues, the use of big data and analytics could bring in, the much needed transformative changes within the system.
Shaktikanta Das, Revenue Secretary, Government of India, recalled the crucial role of technology, for the next level of tax reforms in India. He said that the Goods and Services Tax (GST) should usher the country into a new direction in tax clarity. “The new law would enhance the trust between centre and states,” Das said while addressing the 37th Skoch Summit.
The time heals the wound and the hope gives better chance for sustenance. That is something making the government juggling between its two propositions and enjoys speaking less overtly than required. If believing the old tax practitioners, who keep bearing to the wisdom – one should not expect radical shift in their lifetime on taxation front. Here, the complexities are the only tested fodder – and sufferers or slappers, all seem adept with it.
Sumit Bose, Member, Expenditure Reforms Commission admits that the tax laws needed serious introspection to address the challenges of the changed times. In further elaboration, he reminded that the role of the Finance Commission is crucial and undermining it in any capacity would be short on logic.
“Sharing of tax data is another area that had needed to be looked upon,” he said adding that the areas hampering the revenue income should be spotted and delinked from the system on priority basis.
Besides transparency in tax administrative procedures and laws – getting judiciary more proactive and sensitive towards the tax cases is equally urgent. The country needs no less than a tectonic shift in tax administration to minimise the spectre of disputes. The policies must be set closely with the formulation of strategies – as in principle, the General Anti-Avoidance Rules (GAAR) and Tax Administration Reform Commission (TARC) too have been excellent but are not being able to meet their true potential for lagging on implementation front.
GAAR is basically a set of rules framed to give Indian tax authorities the right to scrutinise and tax transactions, structured to avoid taxes. The rules are applicable to all taxpayers. It was intended to target tax evaders, especially the Indian companies and investors trying to route investments through Mauritius or other tax havens.
Another major tax initiative, the TARC was set to give recommendations for reviewing the Public Tax Administration System of India in the context of global best practices, and to recommend measures for reforms required in tax administration. This makes the case stronger for thorough introspections in policy making and implementations.
The Goods and Services Tax (GST) is a Value Added Tax (VAT) to be implemented in India by 2016. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. It is aimed at being comprehensive taxation for most goods and services. Idea-wise, it is perfect too.
But India is a federal republic, and the central and state governments will thus be implementing the GST concurrently (as the Central GST and the State GST) – so stopping imminent double-dealing underlying with it shall be top-of-the mind for regulators. Moreover, this law will make exports be zero-rated and imports to be levied the same taxes as domestic goods and services adhering to the destination principle.
-Atul K Thakur
(Published in INCLUSION)