The income-tax department needlessly raises the compliance burden for the country's salaried taxpayers, whose taxes are diligently deducted at source.
It has issued a new form that mandates salaried employees to furnish proof of leave travel expenditure and provide the lenders' PAN to claim tax deduction on the interest on home loans. More paperwork for and hounding of salaried tax payers, instead of going after the big fish that dodge taxes.
The biggest chunk of the salaried class earns less than Rs 5 lakh a year. The tax information network already gathers data on financial transactions based on the spending pattern of individuals.
Tax evasion can be tracked when every financial transaction is dovetailed to a foolproof PAN. The case for an IT-empowered government to make intelligent use of technology is compelling. Ideally, the government should tell ataxpayer her tax dues. True, data released recently shows that taxpayers account for an abysmal 1% of the country's population.
Just 18,359 individuals reported earnings in excess of Rs 1 crore in 2011-12 and paid tax on it. Tax evasion is rampant among the self-employed and employment is mostly in the unorganised sector, which is outside the tax net.
It is imperative to widen the tax base, raise the direct tax to-GDP ratio, which slid to 5.5% in 2014-15 from 5.9% in 2008-09, and also lower the cost of collection.
Once adopted, the goods and services tax would provide a built-in incentive for a manufacturer to pay tax in order to claim credit for the taxes paid on inputs across the value chain, creating multiple audit trails and widening the tax base and unifying the tax database.
The urgent need is tax reform and a modern networked tax administration equipped to use big-data analytics to curb tax evasion.
Source:-The Economic Times
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