Tax Payers' Charter: Will it Deliver

Here is the full text of the Taxpayers’ charter released by the Hon Prime Minister on 12 August 2020. Does it make things better for the Taxpayer? For Tax Administration in the country?

 

Through the charter, the department is now committed to treating taxpayers as honest; providing complete and accurate information; giving a fair and just system; and, among other things, reducing compliance cost. The objectives are laudable and like most policy averments are idealistic. It would, however, be important for the department to ensure that these commitments don’t remain only on paper.

 

There are opinions that the new charter is less specific and more like a statement of good intentions. People hope that this would be followed up with concrete timelines to be followed by officials in delivering services. Even though the charter is to form part of the Income Tax Act, it does not give scope for justiciabillity as all the provisions are statements of intention.

 

The potential of the charter to beneficially influence Tax administration would depend on the success of similar reforms taken up by the Government. For example, the I-T Department had rolled out the faceless e-assessment scheme in October last year. The Department selects accounts for assessment based on criteria selected to ensure that only complicated cases, where potential for evasion is high, are selected. Communication to the taxpayer goes from the National e-Assessment Centre (NeAC) in New Delhi. The NeAC randomly allots cases to different assessment units. These assessment units do not correspond to the taxpayer directly, which eliminates physical interface between an assessing officer and a taxpayer. Faceless e-assessment has eliminated territorial jurisdiction and substituted individual discretion, thereby increasing transparency.

 

While faceless assessment is good, there would be challenges in terms of the appropriate explanation that were needed to be understood by the person assessing the tax liability. The system would need some time to stabilize and would be very useful in the long run to enhance a transparent system. However, a large number of tax officials are reported to have already started pushing back against the new faceless programme because they see problems in the lack of consultation and inadequate resources.

 

If teething troubles are left unaddressed, it might erode confidence in the new system. Hence, ownership at the highest level is very important for the system to fulfill its promise of transparence and ease of living, which the Finance Ministers hopes for by all such measures. Tax consultants and practitioners hope that government walks the talk on implementation and does not burden assessees with arbitrary assessment and harassment. Bureaucracy is likely to err on the side of caution and levy higher taxes in all such cases. The experiment should hopefully not remain just a pilot.