A recent World Bank survey of tax laws highlights the fact that India has the most burdensome tax administration among the world's top 20 economies. |
For ages, we have been talking of simplification of direct tax laws. The Kelkar Task Force tried to outline the steps required for initiating and expediting the requisite change in the fiscal paradigm of the country by way of a process transfer on the direct tax side. The most daunting exercise in this regard concerns the tax law itself.
The Indian income-tax law is known to be a cumbersome peace of legislation, running into 298 Sections, twice as many sub-sections, and innumerable provisos and explanations. Add to this the 14 Schedules and the bulky Rules and Notifications, even law ministers have found the legislation difficult to understand.
World Bank survey
A recent World Bank survey of tax laws across countries highlights the fact that among the world's top 20 economies India has the most burdensome tax administration, as measured by the number of pages of Central tax laws. India has 9,000 pages of primary tax legislation and more new pieces of legislation are being enacted than repealed. This, however, is a worldwide phenomenon.
We don't have to give up hopes of simplifications as an idle dream. One simple way would be to bifurcate the Act into corporate and personal tax laws. We can get rid of several sections and chapters applicable to companies alone and make the personal income-tax legislation simple.
Chapters XIIB, XIID, XIIE, XIIF, XIIG, XIIH and XVM apply only to companies. The law has undergone several changes and, yet, the I-T Act contains deleted provisions because cases relating to the period when the laws were in operation still come up for consideration.
There is no particular reason why Chapters XXA and XXC should still be retained in the Act, though the Centre has given up the power to acquire properties apparently undervalued. The omission of all these chapters will go a long way in simplifying personal tax law.
Corporate tax law is no doubt complicated. This can be taken care of by separate tax legislation applicable to companies alone. This calls for a radical mindset. We need a separate income-tax law applicable to individuals and Hindu undivided families alone.
The World Bank survey advised that straightforward tax administration and a simpler tax collection process are fundamental to an effective tax system.
Cost of compliance
The cost of compliance in India has gone up substantially with the introduction of the FBT and the BCTT. The Scheduler system of taxation adds to the complexity. The slow moving tax administration does good neither to itself nor the taxpayer by inordinate delays in the matter of assessment and refunds. Taxpayers are even now wary of demanding refund of excess tax paid for fear of reprisal.
The Government has thought it to fit to implement the suggestion for an ombudsman to take care of the grievances of taxpayers. The appointment of an ombudsman will go a long way at least with regard to the grievance relating to delayed refunds. Now that the necessary notification has been issued, the appointment should not be delayed any further. It is also necessary that grievances relating to refunds are kept confidential.
T. C. A. Ramanujam (The author is a former Chief Commissioner of Income-Tax.)
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