Starting income tax data was in the news recently that only 1.2 crore, or
1% of Indians paid income taxes. Check with the tax department revealed that
the data was somewhat unrepresentative, as it only considered taxes on
salaries. The number of individuals paying taxes is close to 5crore or 4% of
the population.
At the same time, the tax department did confirm that the number of
individuals claiming to have an income greater that Rs 50 lakh annually is only
150,000 in a country of 120 crore people.
Hence, the tax department’s assertion that there is significant amount of
tax evasion in the country may not be incorrect and the so-called hostility
with which our tax officials approach taxpayers is somewhat justified. They
could argue that if people behaved, they would not have to be so rough.
At the same time, there are constant reports of genuine taxpayers
claiming harassment and persecution by tax officials. The tax department many
income earners say, starts with the assumption that the taxpayer is in the
wrong, deliberately complicates rules, comes after you only because you decided
to pay taxes (while ignoring or remaining blissfully unaware of the real tax
evaders and doesn’t seem to be getting any better.
As the Indian economy gets bigger,
we invite more foreign investment, and try to expand our tax base, some reforms
are needed in the way the tax department does its job. It is one of the few
government departments that are in constant touch with citizens. If it
continues to operate in an archaic and hostile manner, much of the benefits of
policy reforms will never accrue to the economy. Here are ten concrete, doable
ideas on what the tax department can do to tax, but with love.
First treat the taxpayer as a customer. The current tax department
mentally is to act like police and approach the taxpayer as a criminal unless
proved otherwise. It is tough to make people part with their money in any case.
The last thing you should do is not be gracious about it. Without the taxpayer,
the government can’t function. Seeking the taxpayer as a customer means taking
constant feedback, having service benchmarks and presuming guilt.
