Day 69 – Q 2. Tax governance in India has taken giant strides in the area of technology assimilation. Do you agree? Substantiate.
2. Tax governance in India has taken giant strides in the area of technology assimilation. Do you agree? Substantiate.
भारत में कर शासन ने प्रौद्योगिकी आत्मसात के क्षेत्र में विशाल प्रगति की है। क्या आप सहमत हैं? पुष्टि करें।
In the last few years, governance in India across sectors has been redefined through business process reengineering, technology and data analytics. Technology is reshaping the way government is designing and implementing programmes. The use of technology has brought in better systems, greater efficiency and is beginning to have a profound impact on governance. Over the last few years, there has been an increased use of technology by the tax authorities and taxpayers alike.
- The global tax landscape is changing dramatically, with tax authorities and taxpayers looking for more and more innovation in tax management. They have realised that tax laws of early 20th century, are not good enough to enable effective tax management in the 21st century. These new models of working run on high-end technology and facilitate transactions in virtual marketplaces.
- India has come a long way in its endeavour to automate tax administration and data processing. The Tax Administration Reform Commission (TARC), under the chairmanship of Dr. Parthasarathi Shome, has recommended extensive use of information and communication technology in administration and governance of tax.
- The Commission emphasised that technology is a critical enabler for the country in its quest to move to modern tax administration. It highlighted areas where technology could play an important role in facilitating and easing tax authorities’ interaction with taxpayers and improving compliance. It also elaborates on the use of technology in forecasting revenue.
- Among the Government’s revenue departments, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) have been early adopters of technology. They have recognised the value of data available in electronic form, the CBDT and CBEC have initiated Data Warehousing and Business Intelligence projects to identify intelligible patterns and plug leakages.
- The systems implemented so far facilitate e-Filing and e-Processing of tax returns by the Centralised Processing Centre (CPC) of the Income Tax Department. Digitisation has led to lower costs in the collection of direct taxes. Almost 98.5% of all income-tax (I-T) returns have been filed online. The I-T Department received 6.84 crore income-tax returns in 2017-18, a growth of 26%, and additionally, more than one crore new tax returns.
- The Pro-Active Governance and Timely Implementation (PRAGATI) programme has used technology to cut across departmental silos and geographical boundaries to ensure speedy project implementation. Real-time updates are being sent by the Income Tax Department through emails and SMS have facilitated its interaction with taxpayers.
- The rollout of the goods and services tax (GST) and the GST Network(GSTN) has resulted in a 50% increase in unique indirect taxpayers compared with the pre-GST system. This translates to a substantial 3.4 million new indirect taxpayers leading to a radical formalisation of the economy.
- Data-linkages between different arms of the government and the institutions in the financial system are enabling the Tax Authorities to capture better information about a taxpayer. Data-linkages are expected to increase the tax compliance base, identify defaulters and make enquiries more specific and ‘to-the-point’.
- Recently, it was decided that every communication to be issued by the Income-Tax Department will now have a Document Identification Number (DIN). This intends to insure proper audit trail of such communication.
At the same time, these are the key challenges facing any tax authority today:
- aInconsistency in information used in various tax filings for diverse tax laws in multiple jurisdictions.
- Lack of effective control over compliance that needs to be undertaken and confidence that the required data will be available to complete compliance.
- Optimisation and achievement of efficiency in the tax function to provide quick but accurate tax input with high assurance for decision-making.
The future also holds great scope for tax governance in terms of technology assimilation where –
- In the ‘Operation Clean Money’ to deal with cash deposits during the demonetisation period, the government had expressly discussed the use of data analytics to identify potential tax evaders.
- The electronic form of data submission throws up significant possibilities for automation and reducing human effort to improve the efficiency of tax compliance and reporting functions.
- Even simplistic technology solutions can significantly aid an in-house tax function. An in-house tax team can develop a web-based portal to document the tax positions being taken in the past.
For years, India has been a complex nation, making it difficult for the common man to access government services. The rapid adoption of digital technology across sectors is making things easy and eliminating all forms of human intervention. Technology will further play a significant role in bringing in more transparency in the Indian tax environment and will be a strong deterrent to unfair practices on the part of any stakeholder in the tax environment. It will also encourage voluntary compliance by making tax compliance and reporting an easy activity.