Widening the taxation network
Monday, 29 September 2008
The tax officials of the government are less optimistic this fiscal of achieving the revenue target set by the government. So far, the response from the individual taxpayers and the holders of undisclosed but not corruption-tainted income has, unlike that of the previous fiscal, rather, been lukewarm. This may make it more difficult and challenging for the tax officials to achieve the overall revenue collection target in fiscal 2008-09. Of late, the time for submission of the annual income tax return has been extended. However, tax-payers are otherwise reported to be more relaxed this year about paying off their income tax dues.
The apparent slow progress so far in tax collection vis-à-vis the target for this fiscal has been attributed by a section of tax officials to laxity in the enforcement of the tax laws as well as the introduction of the universal self-assessment method of filing tax returns. According to the same circles, tough penal measures like the provision of freezing bank accounts and even imprisonment of the holders of undisclosed money unless they complied with the law, contributed greatly towards the enhanced level of cooperation from the taxpayers, in general, last fiscal.
Reportedly, it is the absence of the 'fear factor' that has put a damper on the high level of response that the holders of undisclosed money evinced last year. On its part, the government should, of course, be up and doing to fulfil its revenue target this fiscal. And for this purpose, the best way is to further widen the tax base. The concerned authorities do need to maintain a tough line against the big fishes, who are also traditionally the worst tax-dodgers in society. But this should not alone be the only task of the taxation officials. Also, harsher measures for the possessors of undisclosed but not corrupt-tainted income -- this time they will have to pay a penal tax of 7.0 per cent over and above the normal tax on their such money -- may sometimes pay. But to employ the entire energy of the tax department after these clever operators is also not the wisest way to increase the volume of revenue collection by the government. The tax officials need to go the hard way to widen as well as deepen the tax base. It is necessary to bring those people who have income above the tax-exempted limit but do not hold any tax identification number (TIN) and, thus, are no tax-paying citizens, within the tax network. Here, mere holding of TIN numbers must not also be considered as the capacity of the individuals to pay income tax. A good number of such TIN holders had to take such numbers meeting some circumstantial need and all of them do not necessarily have the income on which tax is payable. Too rigid an approach on the part of the National Board of Revenue (NBR) to such holders of TIN, numbers dating back to five years or more, will not serve any useful purpose. The NBR should better concentrate its efforts on widening the tax network in a purposeful way.
The tax officials have a two-fold responsibility in this regard. First, they will have to convince the potential taxpayers about how payment of tax would benefit the latter in various ways as well as increase their worth and status in society. And here the power of persuasion and motivation will work better than policing. Second, they will have to educate the common people about the procedure of filling their tax returns. On this score, the more the people will volunteer to pay tax through universal self-assessment method, the better will it be the overall picture of tax collection in the country. Policing is not the sustainable way to ensure compliance of the taxpayers. Moreover, the citizens should not be looked upon as a set of delinquents, either, to be forever pursued by the law. In fact, it is the better cooperation between the tax people and the general taxpayers that is going to pay in the long run.
The apparent slow progress so far in tax collection vis-à-vis the target for this fiscal has been attributed by a section of tax officials to laxity in the enforcement of the tax laws as well as the introduction of the universal self-assessment method of filing tax returns. According to the same circles, tough penal measures like the provision of freezing bank accounts and even imprisonment of the holders of undisclosed money unless they complied with the law, contributed greatly towards the enhanced level of cooperation from the taxpayers, in general, last fiscal.
Reportedly, it is the absence of the 'fear factor' that has put a damper on the high level of response that the holders of undisclosed money evinced last year. On its part, the government should, of course, be up and doing to fulfil its revenue target this fiscal. And for this purpose, the best way is to further widen the tax base. The concerned authorities do need to maintain a tough line against the big fishes, who are also traditionally the worst tax-dodgers in society. But this should not alone be the only task of the taxation officials. Also, harsher measures for the possessors of undisclosed but not corrupt-tainted income -- this time they will have to pay a penal tax of 7.0 per cent over and above the normal tax on their such money -- may sometimes pay. But to employ the entire energy of the tax department after these clever operators is also not the wisest way to increase the volume of revenue collection by the government. The tax officials need to go the hard way to widen as well as deepen the tax base. It is necessary to bring those people who have income above the tax-exempted limit but do not hold any tax identification number (TIN) and, thus, are no tax-paying citizens, within the tax network. Here, mere holding of TIN numbers must not also be considered as the capacity of the individuals to pay income tax. A good number of such TIN holders had to take such numbers meeting some circumstantial need and all of them do not necessarily have the income on which tax is payable. Too rigid an approach on the part of the National Board of Revenue (NBR) to such holders of TIN, numbers dating back to five years or more, will not serve any useful purpose. The NBR should better concentrate its efforts on widening the tax network in a purposeful way.
The tax officials have a two-fold responsibility in this regard. First, they will have to convince the potential taxpayers about how payment of tax would benefit the latter in various ways as well as increase their worth and status in society. And here the power of persuasion and motivation will work better than policing. Second, they will have to educate the common people about the procedure of filling their tax returns. On this score, the more the people will volunteer to pay tax through universal self-assessment method, the better will it be the overall picture of tax collection in the country. Policing is not the sustainable way to ensure compliance of the taxpayers. Moreover, the citizens should not be looked upon as a set of delinquents, either, to be forever pursued by the law. In fact, it is the better cooperation between the tax people and the general taxpayers that is going to pay in the long run.