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Photo: PTI
Photo: PTI

Taxation as a fair deal spelt out by the state

The tax transparency platform announced by the Prime Minister could reassure taxpayers of the system’s righteousness. Their rewards, though, will lie in the fulfilment of its promise

Given the battering our economy has received from the raging covid-19 pandemic, it was important for the government to reach out to taxpayers, remind them of their responsibility in shoring up the exchequer to enable a recovery, and reassure them of an effective and fair—even friendly—taxation regime. On Thursday, Prime Minister Narendra Modi did just that. He launched a platform to honour and reward those who have been paying their dues honestly, even as his administration seeks to reform and simplify our notoriously complex tax system. Unveiled under the title “Transparent Taxation—Honouring the Honest", its principal promise is to turn tax collection as transparent as digital tools allow. This, he said, will make the system fairer and taxpayers fearless. The three support pillars of the platform are faceless tax assessments, with no officials in the picture, a provision for faceless appeals, and a taxpayers’ charter of duties and entitlements. Apart from the online appeal mechanism, which kicks off on 25 September, the other two take effect immediately. The sample of assessees placed under scrutiny will be picked randomly by computer software, squashing the role of individual discretion and thus scope for harassment. The broad objective is to eliminate bias through automation.

Under the newly published charter, the tax department expects honesty, accuracy of calculations and timely payments, among other things, and commits itself to assuming innocence unless there’s a reason not to, respecting everyone’s privacy, taking decisions within specified time frames, offering redressal mechanisms, and suchlike. Much of this might be considered implicit in the so-called social contract that governs our relationship with the state, but not everyone is aware of its finer points. That there is “no quid pro quo" involved, for example, often seems lost on those who complain of not directly getting their money’s worth, or imagine that the revenue raked in should be spent on what they deem fit. The existence of a public charter, therefore, could go some way in setting the record straight on what the deal is. While there will always be citizens who see taxes as extortionist, to be paid only in fear of being hauled up and penalized, the government has done well to emphasize its own end of the bargain for the first time in such an explicit manner.

In general, the government has expended much effort in recent times on portraying India’s taxation set-up as taxpayer-friendly rather than coercive. This is to be welcomed. There is, however, a context to this exercise, one generated by perceptions of an overkill on the part of authorities in their zest to maximize tax collections. So, while the Centre’s avowals would surely be noted by all concerned, their proof would lie in how well they are implemented. This may require a substantive simplification of levies. The rules on personal income tax, for example, offer a choice between different rates applied with or without availing exemptions. Then there is the novelty of pre-filled forms, enabled by the e-capture of information and new database links, but it is unclear if this would relieve taxpayers of the need to calculate every little liability, be off shares or other assets. If revised norms and processes reduce tax-related litigation, then so much the better. For now, though, we can only hope that our shift towards digitization lives up to the hype around its wonders. A fulfilment of that expectation would be its own reward.

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