23 02 2015
Monday
IN his 2013 Budget Speech, the Finance Minister said,"An emerging economy must have a tax system that reflects best global practices. I propose to set up a Tax Administration Reform Commission to review the application of tax policies and tax laws and submit periodic reports that can be implemented to strengthen the capacity of our tax system."
Accordingly the Tax Administration Reform Commission (TARC) was constituted in August 2013 under the Chairmanship of Dr.ParthasarathiShome. The Commission was to have a tenure of 18 months which ends this month and the Commission has,true its mandate, submitted its fourth and final report to the Finance minister on 20 th February 2015.
TARC observes,
| The tax administration should progress from a position of the sovereign right to revenue to that of a public service oriented facilitator of the taxpayer and protector of his rights. |
| Collection of revenue, driven solely by rigidly mandated targets should be eschewed. |
| The complex web of intricate regulations and procedures and poorly drafted and ill-considered laws that have led to uncertainty in business climate and unwarranted risk in economic activity must be quickly and steadfastly eradicated. |
| The practice of issuing ‘precautionary demands' as a counter to adverse views from the CAG has taken away the zeal to combat views opposed to that of an Assessing Officer (AO) from the tax administration, thus leading to lack of trust in the AO. Besides, senior officers seem to be aware of field practices and have instituted ‘vigilance' including anonymous tipping off to keep staff on their toes, but the result has been deep demoralisation at the lack of trust. |
| Reform must come from two directions. For taxpayers, the compliance costs have to be drastically reduced and some lightening of the most egregious taxes is called for. For tax officers, the inducements could be a hike in pay and bonuses reflecting performance. The criteria and modalities will have to be designed and spelt out, perhaps linked to quality collections. The objective has to be to get all stakeholders - tax officers and taxpayers - to operate in ways that promote the overall goals of efficiency and equity in tax collection by facilitating taxpayers with a customer focus while, at the same time, segmenting taxpayers to reduce tax evasion. |
Revenue Officers not able to give refunds because of targets - TARC feedback
THE TARC interacted with the Revenue Boards, Field Officers and officers associations for feedback.
Many officers indicated that they were in favour of giving appropriate and timely refunds but were unable to do so due to policy reasons arising from revenue targets. (DDT learns that recently a Commissioner of Central Excise shouted at an Assistant Commissioner for giving refund legally legitimately and rightly, but against the oral instructions of the Commissioner that no refund should be given. - In some Commissionerates they have stopped receiving refund claims from December 2014. December to March is a NO REFUND period)
There was a general resistance to the idea that private professionals should be inducted into the office of the Ombudsman, with some expressing the fear that such outsiders might bring in vested interests.
An important constraint expressed by many in relation to improving the quality of customer services was the woeful inadequacies in infrastructure, such as office accommodation of acceptable standards, poor furniture and a basic lack of amenities. Let alone space for facilities like lounges for visitors, very often officers and staff themselves were suffering from such inadequacies. Further, there was acute shortage of funds for augmentation of infrastructure and painful delays in the processing of proposals from field officers. This was voiced in virtually every interaction. Cadre Review has worsened the situation.
Career bureaucrats in general are fiercely protective of their turf. It was not surprising that TARC's recommendation to enable lateral entry of experts in key roles and specialised areas met with some resistance, perhaps because of the apprehension that the integration of the experts who enter the departments laterally at the decision making levels would shrink their own career prospects.
The CBEC did not agree that there should be a DRP (Dispute Resolution Panel) for indirect taxes along the same lines as in the I-T Act. It felt that the DRP was not a workable solution in CBEC and that it would just add one more layer in the dispute resolution process.
The income tax as well as indirect tax field welcomed the idea that, on disposal of a case by the Supreme Court/High Court and if the judgment is accepted by the Department, instructions should be issued to all authorities to withdraw appeal in any pending case involving the same issue.
No comments were provided on the recommendation that refunds sanctioned on the indirect tax side should be paid along with the automatic application of interest as is done in the case of income tax and should not be based on demand by the taxpayers. As in the case of income tax and customs duty drawback, the refund and interest payment should be directly credited to the bank account of the taxpayer.
TARC Suggestions for Immediate Attention and Possible Action - Merge CBDT and CBEC
THE Tax Administration Reform Commission (TARC), after considerable deliberation and consultation, has made a menu of recommendations that should be taken as a package and reform should be undertaken on that basis. However, instead of waiting for massive action to take place, it is feasible to initiate action immediately on various fronts and the Commission has suggested the following:
Customer focus: Improving the way in which tax administrations work with taxpayers not only results in better customer service but also has the potential to increase tax revenue. Taxpayers are more likely to comply voluntarily when tax administrations adopt a service-oriented approach towards them. Educating and assisting taxpayers help them meet their obligations comfortably. Taxpayer services, therefore, need to be taken as an integral part of the functions of a responsible and responsive tax administration, and these should, therefore, be strategised and institutionalised as an on-going and continuous process rather than a sporadic one.
Set up Large Taxpayer Service (LBS): The present silo working of the Large Taxpayer Units (LTUs) has not achieved desired integration through data sharing or building a common framework for delivery of services to taxpayers. The experience so far has been far from satisfactory, preventing a comprehensive taxpayer focus. It also fails to provide a level playing field among similarly placed, large taxpayers in other countries. Setting up Large Taxpayer Service (LBS) with unified taxpayer services, compliance verification, dispute management, and recovery and tax debt collection will provide improve the ease of doing business.
How can Large Taxpayer Service be called (LBS)? But that's how TARC calls it! Elsewhere in the report TARC states that LBS is Large Business Service.
Dispute management: The Indian tax administration has more disputes than any other by far. It is important to relieve the tax administration as well as the taxpayer of the undesirable burden of this legacy so that both can look to a more positive and productive future. A special drive should be launched to review and liquidate cases currently clogging the system by setting up dedicated task forces in the two Boards having measurable targets.
Joint Tax Policy and Analysis: Currently, little meaningful analysis is carried out by the Tax Policy and Legislation (TPL) and Tax Research Unit (TRU) of the CBDT and CBEC, respectively, which would stand the test of international comparisons. Tax law making is required to be carried out with a more consistent and coherent approach in a joint Tax Policy and Analysis (TPA) wing of the two Boards with enhanced research. The TPA should have multidisciplinary inputs and data analysis, so that tax laws, which are an important instrument of fiscal policy, reflect that character. The present silo working, the units of the two Boards working independently and reaching the Finance Minister in separate channels, does not achieve this basic objective. It defeats the objective of achieving ease of doing business on the one hand, and consolidating the investigation function on the other.
Common database: A common and unified database of taxpayers between the two Boards - currently absent in contrast to international practice - will lead to great gains both in terms of enforcement and taxpayer services. The establishment of an independent entity through an SPV for a common and unified database focused on ICT-based service delivery will provide the concentration, flexibility, nimbleness, resources and specialised skills that are direly needed. An SPV will also provide the desired economies of scale in computerisation, contribute towards establishing common data standards, and build security systems and practices acceptable to both Boards. Overall, the digital transformation will offer new opportunities for sharpening the tax administration.
Optimally merge the CBDT and CBEC's department functions in a step-wise manner: As a step towards fundamental tax administration reform, and following widespread international practice, the present structure of the CBDT and CBEC should be unified and converged in the next five years in governance, vision, mission and approach to tax policy formulation and administrative delivery to taxpayers, anchored in a more unified management structure, so that it is able to respond to emerging challenges quickly and positively. An announcement to this effect - that government means to undertake convergence - will be a landmark step in the right direction.
Export Promotion Schemes - Calicut Airport added
UNDER several exemption notifications pertaining to imports under the various promotional schemes, the imports are allowed only through certain ports, airports, ICDs, or Land Customs Stations. Now Airport Calicut and ICDArakonam are added to the list of airports/ICDs notified for export and import. 26 Notifications are amended.
It looks as if some more notifications are to be amended to include Calicut and Arakonam - Has the Board missed them?
Notification No. 05/2015 - CUS Dated: February 20, 2015
Customs Duty Paid by Mistake - No limitation?
DUE to mistake in classification an importer paid Customs Duty of Rs. 3.6 crores, when he was not liable to pay any duty. He realised the mistake after three years. No problem, ruled the Calcutta High Court.
A person to whom money has been paid by mistake by another person, becomes at common law a trustee for that other person with an obligation to repay the sum received. This is the equitable principle on which Section 72 of the Contract Act, 1872 has been enacted. Therefore, the person who is entitled to the money is the beneficiary or cesti qui trust. When the said sum of Rs.360.46 lakhs was paid by mistake by the petitioner to the government of India, the latter instantly became a trustee to repay that amount to the petitioner. The obligation was a continuing obligation. When a wrong is continuing there is no limitation for instituting a suit complaining about it .
The High Court directed the Customs Department to refund the amount within 12 weeks.
Will the Customs Department refund nearly four crores? Matter may soon reach the Supreme Court.
We bring you this decision today. Please see Breaking News.
What Espionage? Documents should be in Public Domain anyway - ASSOCHAM
ASSOCHAM says:
The only way to get rid of so-called corporate espionage in the labyrinth of state machinery is to introduce complete transparency and demolish the four walls of secrecy around the process of ‘decision-making'.
In any case, one fails to understand what is all this fuss about? After all, any Indian citizen can rightfully access any government information or even document through a legal way by the Right to Information Act. The piles of documents which are being hyped up as the corporate espionage can be sought from any government department using RTI, with the exception of the national security matters.
In any case why should the government decision-making concerning policies which have a bearing on the corporates be shrouded in secrecy. Let all the policies be first put up on the web sites as drafts and let all the conflicting interests debate, deliberate and slug it out by their legitimate arguments right in the public view.
We are not living in the periods of cold wars and different blocs of the Sixties and Seventies.....India is on way to becoming a global economic power. Each of the Indian and multinational companies should be within its rights to operate with full freedom. They also should have a right to engage in lobbying groups to advance their line of arguments and convince the decision making authorities that they have merit. Lobbying should no more be considered as a dirty word.
Police should also refrain from painting the entire corporate world with the brush of espionage. If we have to take the country forward and win global investors, this kind of so-called espionage stories will not do us good. What we need is strong regulators, open decision making.
Even the Budget making should also be done in a transparent manner and this practice of changing and altering tax slabs, rates every year should be stopped. There should be long term policies with clear vision with the fair and transparent rules of the game.
Indian Accounting Standards
MINISTRY of Corporate Affairs has notified the Companies (Indian Accounting Standards) Rules, 2015. They shall come into force on the 1st day of April, 2015. The Companies and their auditors shall comply with the Indian Accounting Standards (Ind AS) in preparation of their financial statements and audit.
The insurance companies, banking companies and non-banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily.
MoCA Notification: Dated February 16 2015
FTP - No MEP for Potatoes
MINIMUM Export Price (MEP) on export of Potato has been removed. Notification No. 85(RE-2013)/2009-2014 dated 26th June, 2014, is amended.
DGFT Notification No.112/(RE-2013)/2009-2014, Dated: February 20, 2015
ITAT Strictures against CA
IN a recent order the ITAT observed, "The affidavit and cavalier conduct of Shrixxxx, C.A. raises serious questions on his professional competence and work ethics in giving such an affidavit which hides more than it explains".
Until Tomorrow with more DDT
Have a nice day.
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