Taxman to lose discretionary powers?

In what may help in discouraging accumulation of black money and boost tax compliance, the government could look at whether tax officials could be stripped of “discretionary powers” in fixing liabilities in evasion cases, said NITI Aayog vice-chairman Arvind Panagariya.

The former chief economist of Asian Development Bank (ADB) said a major overhaul of tax reform was required to simplify and make it more effective for a higher compliance level. “A lot of evasion of taxes happens when there’s too much discretion on the part of officers. So, we need to simplify. “Simplification would mean doing away with (tax) exemptions. In addition, (we need to) also define situations much more precisely so that it leaves no room for discretion for the tax officers to decide whether under such and such situations you are liable to tax, you are not liable to tax,” he told a TV channel on Friday.

Prime Minister Narendra Modi has come out with many schemes and introduced a Bill in the Parliament to revise the Income Tax (I-T) Act to curb black money in the economy. Ravi Mahajan, tax partner, EY India, said Panagariya could be talking about discretionary power of I-T officials in the context of levying penalty.

According to him, currently there were no uniform rules for levying penalty on tax evaders.  

“If this is what they (the government) are thinking then maybe they will make penalty also a mandatory levy like taxes, and not a discretionary levy. They could even moderate the penalty a bit to improve compliance rate,” he said.

The government has been working towards improving the rate of tax compliance through various measures including legislating the goods and services tax (GST), which will unify all the current indirect taxes such as VAT, excise, service and others. Mahajan expects removal of discretionary authority of tax officials to reduce litigation, which are long drawn and messy. Panagariya also hinted at easing of stamp duty for real estate dealings with a possible rise in on-the-book property deals in the wake of the ongoing crackdown on unaccounted wealth.

On Friday, the government also informed that it had suspended 27 officials of various public sector banks (PSBs) and transferred six officials to “non-sensitive posts” after being tipped off on irregularities in bank transactions after demonetization of Rs500 and Rs1,000 currency notes since November 8.

“Some cases have come to notice, however, of officials involved in carrying out transactions which were irregular and violative of RBI’s instructions. Action has been taken in such cases and 27 officials of public sector banks have been suspended and 6 officials have been transferred to non-sensitive posts,” said a finance ministry note.

RIFT OVER GST WIDENS

Friday also saw the widening of rift between the states and the Centre over the issue of dual control in the crucial GST Council meeting, which will continue today. It is important that there is consensus among all Council members to finalise the draft laws for the proposed indirect tax. Once the three model GST Bills – IGST, CGST and Compensation Act – are approved by the Council, it will be introduced in the Parliament during the ongoing winter session.