Parthasarathi Shome calls for major tax rejig
He recommend abolition of post of revenue secretary and merger of CBDT and CBEC
New Delhi: Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome has recommended abolition of the post of revenue secretary and merger of CBDT and CBEC.
It has recommended against setting blind revenue target saying it “causes unjust pressure on good taxpayers.” The committee said that the retrospective amendments to tax laws should be avoided as a principle and income-tax return should also include wealth tax details.
“The post of revenue secretary should be abolished. The present functions of the department of revenue should be allocated to the two boards. This would empower the tax departments to carry out their assigned responsibilities efficiently,” said TARC in its report submitted to the finance minister.
On setting blind revenue targets, the committee said that modern tax administrations do not use a fixed or static revenue target. It said that tax gap between the projection of revenue at the start of the fiscal against what is actually being collected should be minimised through better collection efforts by reducing or eliminating tax evasion.
“Rather than putting pressure from the top on officers below, who in turn, pressure even good taxpayers to contribute more revenue or postpone making due refunds in particular during the last quarter of the financial year such policies would be illegal in other law abiding societies,” said the report.
Consequently, it said that instead of formulating policies with respect to tax administration and tax policy, several board members take on the role of tax collector.
“The consequence, unsurprisingly, is two fold, first, a dearth of meaningful tax policy or tax administration policy and, second, an inequitable pressure on the good taxpayer,” said the report.
The committee said that in the direct tax area, transfer pricing examination between associated enterprises should be used as a tool to minimise tax avoidance. “In India, transfer pricing measures are used for revenue generation, which comprises a completely wrong approach,” said the report.