India: Income Tax

Hon’ble PM Narendra Modi launches the Taxpayer Charter


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The Taxpayer Charter unveiled by the Hon’ble Prime Minister Narendra Modi today marks an important milestone in our nation’s history. It enjoins the commitment (14 affirmative actions) of the lawmakers as well as highlights the obligations (6 expectations) of the taxpayers. The Prime Minister, while acknowledging that the present system is replete with challenges on service delivery to honest taxpayers, and has, in the past, been an impediment for doing business in India, focussed his attention on honest taxpayers being spared from harassment at the hands of the administration. He has also highlighted the importance of simplicity in compliance, clear regulations and happy taxpayers, leading to a happy society. Focussing on the three pillars of the tax system − Seamless, Painless and Faceless − the Taxpayer Charter was unveiled.

What stands out in my view is the Charter’s emphasis on the respect for taxpayers’ privacy and maintaining confidentiality. Absence of such categorical statements, in the 2014 Citizen Charter of the CBDT had led businesses to difficulties in dealing with speculative news on tax-affairs of individuals and corporates coming in the public realm and impacting their right of privacy. Similarly, publishing service standards and reporting them periodically as part of the Charter shall put the focus back on the tax-administration and its day to day functioning.

Now with the legislative sanctity to the Charter, the detailed guidance is something that the taxpayers shall look forward to. From today’s announcement, I could see leaves from the UK Charter focussing on respect for taxpayers and the Canadian and South African Charter which have focussed upon Confidentiality, Secrecy and Privacy as the basic tenets of Common law system.

What would be expected of the administration is to make a fresh start in widely publicising the Charter and creating an awareness campaign leading to a new era, which so far has been known more for its wrongs than the right things it has pursued in the past decade of tax reforms. Equally important will be a strong mechanism of accountability instilled in the field officers to act responsibly keeping in mind the spirit of the Charter. Though the strictest form of action has been initiated in recent years against corrupt officials, actions against errant officials is an aspect that is not noticeable in the Charter. This in my view is key – even instructions given by the apex tax administration body such as the CBDT remain unimplemented by field officers; common illustrations being disposal of rectification applications, giving effect to the appeal orders, dealing with mismatches of tax credits, disposal of appeals by the first appellate Commissioners, etc. All of this brings disrepute and bad press to the nation. The Taxpayer Charter implementation will be closely watched given the importance the lawmakers have accorded at the highest level.

What I would like to see is the accountability matrix and ways to deal with non-compliance by officials, a forum for redressal of taxpayer grievance by empowered officials in situations where citizens feel that their rights have been violated. Finally, I also feel that the tax statutes need an amendment to curtail and restrict the discretional powers of the field officials because that has predominantly contributed to the current situation. The faceless assessment and appeal scheme shall act as restrictions on individual discretion, which in my view has caused the most damage with regard to harassment and which the Hon’ble Prime Minister also emphasised upon.

To sum up the debate on taxpayers’ rights and enforcement mechanism, I am reminded of a favourite quote by First Marquess of Halifax in Maxims of State, 1700.

Power and liberty are like heat and moisture; where they are well mixed, everything prospers; where they are single, they are destructive…


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Ravi Sharma
3 months ago

This is a significant update. Very educative.

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