Uber Case and Public Policy Thoughts

A few years ago public transport in Delhi (as in most parts of India) was pathetic. The public transport buses were unsafe; especially for a girl who can be reasonably sure of being groped (at the least) if she dares to get into a city transport bus; especially alone. You had to rely on the local taxi stands to hire a taxi and they may not have a taxi available when you want. When you hail a taxi the driver would ask you where you are going. If your destination did not suit him, he would refuse to take you. When a taxi driver deigned to take you, he would refuse paying by the meter and make quote you a fare which is often 1.5 to 2 times the actual fair. When he used the meter, it would be a doctored one or he would take the most circuitous route to your destination if you were not familiar with the city. When you went shopping or visiting a friend there was very high uncertainty about getting a safe transport back. The auto rickshaw drivers also behaved the same fashion (They do that even today) .

When you get a taxi you had no idea who the driver was or what his name was. Often he brought along “his friend” along with him. If you asked him who that person was or didn't want this 'friend' to be in the car for your journey, the driver would get upset and refuse to take you. As you were desperate and had no other option you put up with these dramas. There was no authority with whom you could give a complaint. (You won't even consider complaining to the police) There have been many instances of such drivers misbehaving with passengers; especially ladies. Many of the regular black and yellow taxis still continue with such behaviour. A Canadian friend who has been visiting India for about two months told me that whenever she was travelling without an Indian friend with her, the driver refused accepting fare as per the meter.

The Metro has made a big difference in Delhi. In most other cities the metros are non-existent or limited. Then the radio taxis happened. Situation started to improve. With more and more operators joining the fray there was more competition and each of them added more features and services. Call centre support for cab booking and customer support, mobile apps, GPS tracking, online receipt, online payment and so on. With the improved supply you could be sure of getting a cab when you want. The service levels have significantly improved, there is more reliability and the quality and comfort of the vehicles too have improved. Although per kilometer charge is higher for these radio taxis, the total bill ended up being lower as the meters are not doctored and the driver is not taking circuitous routes. Even today the pre-paid cool cab charges from airport to my home in Mumbai ends up being more than the radio taxi charges including their service charge of Rs 60. With registered drivers of radio taxis who are also given some training and monitored to some extent customers feel safer than before. There had been hardly any major complaints about the behaviour of these drivers. I am not saying that everything is perfect. There are still areas for improvement.

Then the disaster hit. One unscrupulous driver has molested an unfortunate lady. It is an absolutely dastardly act. No doubt that the driver has to be punished suitably. We also have to improve the systems and processes to prevent such occurrences. But the knee-jerk reactions of administrative decision makers once again demonstrates the pathetic state of decision making founded on emotions and populism. This is not the first instance of ridiculous action by regulators and law enforcement agencies.

The Police has acted fast and has apprehended the culprit quite fast. This is commendable. DCP south has been giving twitter update on the investigation which is appreciable.  But one of the first policy decisions on this taken by the administration is banning Uber and similar services. Some states have followed suit in extending this ban to their states. By doing that, we have created a shortage in the market and this has opened avenues for un-scrupulous behaviour by cabbies. I am a regular user of taxis and I experience it. Many of my friends also share the same feeling.

Are the operations of Uber and OLA so dangerous that we need to ban it immediately? Not at all.

Let us look at this a little deeper. Uber had a system of driver verification. They relied on a document that was submitted by the driver. It appears that the character certificate that he submitted was forged and not issued by the Additional DCP as claimed in the certificate. Uber should have had a process of undertaking much more serious background check of its drivers and verification of the veracity of the documents that it receives. These service providers could also have better tracking systems. It will be easier for law enforcers and regulators to demand and monitor such good practices on organised entities like the radio taxi operators than enforcing such good practices by each cabby. By outright ban of these entities we are not reducing the risk rather increasing it.

A case has also been charged against Uber for cheating as they failed to take necessary measures to live up to the promises they have made.

It has been also reported that the same driver used forged certificate to get a permit to drive his cab in the capital. Are we taking action against the department or the officer for dereliction of duty in issuing this permit without verifying the documents presented? With commercial taxi licenses, people like him manage based on such fake documents, (which is not verified at time of issue of taxi permit) if these drivers operate as an independent taxi operator and commit such crimes, tracking them would be even more difficult and this could turn out to be even more dangerous.

When we prescribe more documents and verification processes, we also have to establish convenient and speedy mechanisms to issue these verification for genuine applicants. The sad thing is that it is a herculean task to get any kind of clearance documents and validation of the clearances from government departments unless you have “connections” or willing to pay “speed money” directly or through touts. This makes the whole process a bottleneck and avenue for corruption and encourages bypassing of such verification. Therefore we also have to establish processes for speedy verification and validation processes. For example the Police can consider making online verification of certificates issued by it. Further, the Police also could make it possible to get verification done in an easy and fair manner. It could also have exception handling mechanism to take into account practical problems. For example I came to Delhi from Mumbai and took up a rented apartment and I wanted a police verification done on my Proof of Address. I was going from pillar to post and I had to take help of a senior bureaucrat who is a friend to help me. Imagine the plight of an ordinary person who comes to a metro in search of a job. May be wider acceptance of Aadhaar Card would address this issue to some degree.

We see such knee jerk behaviour very often. Let me quote some more examples. Remember the A 320 air crash in Bangalore soon after Indian Airlines bought these aircrafts? Our reaction has been to ground the whole fleet of 320 for a very long period resulting in severe loss to the airlines. We are the only country in the world which did that.

When there was complaint against the overcharging by some Micro Finance intermediaries the reaction has been to ban such companies instead of establishing good practices and enforcing the same. When we do this the only option left to the poor customers is to fall into the clutches of money lenders with usurious interest rates.

When there is complaint against ill treatment or malpractices by some NGO we have instances of the whole community of NGOs harassed and treated shabbily resulting in genuine players avoiding such initiatives.

The government instead of improving its services, taking ownership of its duties and being accountable for its mistake place the whole blame on the private service providers. Swaminathan Anklesiaria Aiyer's comment regarding the Coal Scam in TOI is quite relevant in this context.  “The Government was found guilty of wrongful coal allocations, but suffered no penalty. Instead mine operators not found guilty of anything had to pay huge fines to the guilty government. .. Investors are increasingly apprehensive that Indian Institutions no longer provide stable decisions or secure property rights”

The regulator and the law enforcer have to keep in mind that it has a balancing act to do. On one side it should establish good practices and enforce them. It should prevent monopoly behaviour, it should ensure good practices are followed for the safety, security and convenience of the user. On the other hand they have to keep in mind that regulations and regulating agencies also have a development role to play; helping and supporting service providers to establish good practices and to evolve and thrive rectifying their mistakes.

It should be practical in managing the evolution of the regulation and market practices. As Judge Learned Hand one of the very respected American judges observed “Justice is the tolerable accommodation of the conflicting interests of society, and I don't believe there is any royal road to attain such accommodation concretely.”

If we make rules that cannot be practically followed, then we will not have decent service providers but we will be at the mercy of shady operators who operates outside the law. When mistakes and failures do happen, the reaction should not swing to the extreme. If the error is technical in nature and does not reflect willful and repeated irresponsible behaviour that can potentially cause disaster to the community then the penalty should commensurate with the mistake and solutions should be implementable. We need to help these entities to improve and not kill them. What often happens is that the regulators go heavy on technical errors  making it difficult for many genuine service providers and leaving the ground open to the fringe players who act outside the regulated market or without any service standards at all. Very often these shady operators make these regulators to clear way for them consciously or unconsciously by eliminating decent operators. 

"We live in a stage of politics, where legislators seem to regard the passage of laws as much more important than the results of their enforcement." - William Howard Taft

Reforms in Tax - A taxpayer’s wish list

[Excerpts of my speech at Conference on India 2.0 as a part of 37th SKOCH Summit at India Habitat Center, New Delhi September 2014] 

 “The only two things certain in life are taxes and death”. Why was taxes compared with morbidity and death and taxmen considered a villain? Because tax was considered legal extortion. The expected role of taxman was to make life difficult for those who don’t comply. The tax laws were complex and complicated that even genuine taxpayers ended up making mistakes. Instead of being an enabler catching these mistakes was the prime focus of the department. Complexity of the tax law was a aid in this enforcement by terror and a tool for the corrupt.

The modern tax department is attempting a shift in its focus. The shift is towards being an enabler, making it easy and convenient for the genuine taxpayer to comply.

This is one of the tectonic shifts that are happening in the environment for the tax administration. There are more. The quantum leap in the volume of trade and commerce in the economy is resulting in exponential growth in taxpayers and taxable transactions. The globalisation leading increased international trade and e-commerce are adding to complexities to tax administration. In India the impending transition to a nationwide transition to Goods & Service Tax (GST) is another big shift expected in the near future. (Though this near future shift has been eluding us for years, we hope it will fructify this time)

In this increasing complexity and exploding volume the challenges are manifold for the tax administration especially with shift in their focus and the attendant reforms it is attempting.

Let us take a look at some of the expectations the taxpayer have with respect to these reforms.

Simple, Up-to-date, consistent information online

To begin with the taxpayer expects simplification of laws which are easy to understand and comply with limited exception and a nationwide standardisation. We also expect comprehensive information available online. Today many of the tax administrations in our country have web portals and have made extensive information available online. But they often come with a caveat along the following lines. “The department does not claim this to be up-to-date or comprehensive. The taxpayer is expected to keep himself abreast of all latest notifications and amendments and the department is not responsible for any fashion for any error and omission in the information available in this site”

We need to go forward in our information dissemination. We need you to guarantee that “what is not published on our portal does not exist” I am not suggesting a utopian model. Many regulators and law enforcement bodies in the world have already reached this level of sophistication.

Will it be possible to publish your interpretation of confusing provisions very clearly? In this manner it would also be consistent in its dealing with the taxpayers across the country.  It could help in reducing the rent seeking behaviour of many assessing officers who attempt to interpret for their convenience.

Don’t ask for same information again and again

Various tax departments in the country ask the taxpayers same financial information multiple times. Can you establish a mechanism to collect financial information from the taxpayers once and share the same among them as needed? Only in case in which it needs additional information for specific investigative purpose it should contact the taxpayer again to provide the same.

Can we think about standardisation of data format?

Different tax authorities today specify different data formats and technology specific forms to submit the data. Could you consider establishing a technology agnostic data format like XBRL for collection of data? This would also require a standard taxonomy being developed for all financial reporting for various tax departments if not for all other regulators who require the same financial information.

Avoid calling me in person and when you call please don’t make me wait

Can you consider establishing processes that could avoid physical visits for routine matters? Tax payers should be able to interact with the officers over phone or mail for routine matters. Even when they are required to visit for some clarification they should be given advance intimation of the documents and information they have to bring and should give them appointment to and adhere to the agreed time and avoid making them wait.  

Can I pay tax from my account in my bank?

In this day and age of electronic connectivity can you allow me to pay all my taxes from my account of choice instead of asking me to open accounts in different banks by different tax authorities

What I am hoping are not impossible to be met. But it needs a change in mind-set. We can hope that we will reach there one day

To make a crooked stick straight, we need to bend it the contrary way. - Michel Montaigne

Digital India 2.0 Hoping for the best

[Excerpts of my speech at Conference on Digital India as a part of 37th SKOCH Summit at India Habitat Center, New Delhi September 2014]

If somebody asks me my opinion about the Indian Movie Industry my reply would be; “It is big and thriving, some of its productions are world class, exciting and memorable. But it has also created a lot of crap.”  My reply would be the same if anybody asks for my opinion on e-Governance in India.

Why do I say so? Let me give two metrics in support of my statement. Firstly as per DeiTY tracking system for electronic transactions we have had just about 2 billion electronic transactions in 2013 and in 2013 this number has already reached this number in the first 8 months. Impressing in a way. But for country with more than a billion population and internet penetration of 100 million (which itself is quite low and is an expression of poor internet infrastructure  and not enough relevant and convenient service offerings compared to 8000 million mobile phones) it is 20 an average of 20 transaction per month per person. When we consider that it covers both central and state services including online utility payments, it is not something to shout from the rooftops.

Secondly, let us take a look at the eGov Development Index (EGDI) of UN which it publishes every year. In the last few years India’s ranking has been hovering in the range of 110-120. In spite of India being a powerhouse in the world of Information Technology, we are so low in the world ranking of EGDI. We have even managed a drop in our ranking from 113 in 2008 to 118 in 2014. On the other hand South Korea holds top rank for past many years.

It is in this context that we should look at the Digital India 2.0 Program that has been announced recently. It has all the Right Intentions, Great Ideas and Enough Resource Allocation. But then, Is it much different from the NEGP of yesteryears?. If we look at NEGP, it also had right intentions, right ideas and enough resources when it was launched. But then why did it fail deliver what it should? The fundamental problem was in the “Implementation”.  Let us take a look at some key learning from our experience of yesteryears. The weakness was in the foundation itself of most of the projects; which includes stable citizen focus, leadership, procurement and contracting strategy, continuous improvements and business models. Let us go a little deeper.

Most of the e-Gov initiatives are “transformational Projects” and not automation of the existing stable processes. Such transformational projects would require a re-look at the existing processes and undertake a re-engineering of the processes with a citizen focus and taking full advantage of what technology can offer. When I say citizen focus it means that the workflow and processes should attempt to make it easy and convenient for the citizen to access the services online. When he asks for a service from one government department he should not be asked to get a document/ certificate from another government department. The departmental systems should be able to talk to the other departmental systems electronically to source/ verify information available with the latter. This in addition to facility for online application could significantly reduce multiple interactions that the citizens have to make with the government departments and the related rent seeking and harassment.

One of the challenges in integrating the systems of different departmenst was the absence of a mechanism for uniquely identifying a person. Now that penetration of UID in India has reached significant levels, this problem has nearly been solved. Therefore, it is important for every departmental automation project to incorporate UID tracking of beneficiaries to the extent possible.

Any transformational project will succeed only if there is a stable and visionary leadership; especially during the conceptualisation and roll-out. Whenever government managed to place such people in the leadership roles the projects benefited. In many cases the selection and transfer policies of the government does not take this into account at all. This means poor choice of mission leaders and or key people frequently getting transferred; especially in critical stages of the project. Such changes not just affect the momentum of the project but are also counterproductive. One of the key reasons of  failure of many e-Gove projects is this.

Establishment of transformational project cannot be handled like an event management. It is an evolutionary process; a journey and not a destination.  But normally many government departments treat all projects alike an event management. There would be a study of the current processes, some kind of process re-engineering, development of specification for developing the software application , choosing of technology solution, getting the solution developed/ customised and rolling out the solution. During this process there we seed involvement of senior officers.

Once it is rolled out it is left to the operating staff to take care. But what is needed for success is continuous improvements. There should be continuous tracking and refinement of the processes, to strengthen validations, communication and clarification for the users on the basis of feedback from the field. This review and refinement should be led by the senior officers responsible for the mission. Only then would it reach adoption and acceptance of a broader cross section of clients. Often the feedback from the field is not given due importance. By the time the normal governmental process gets the approvals for these amendments it would be too late. So much negative image would have been created that adoption would have really suffered. Many users would have written this off. If we take the few projects that has demonstrated significant acceptance like Tax Information Network of CBDT, MCA 21 of Ministry of Company Affairs, Passport Seva Project of Ministry of External Affairs UIDAI etc were those which had taken this philosophy of continuous improvement seriously.

In addition to these efforts for continuous information there is also a need for education and handholding of the users so that they get used to the new system and make fewer mistakes. Even in this dimension many projects do badly.

The other major area of failure is in the procurement and contracting process of the government. Many departments select the lowest cost bidder referred to as L1. This often significantly affects the quality; especially in cases of services because it is difficult to quantify quality and monitor it. Some departments attempted Quality Cum Cost Based Selection (QCBS). But very often most of the bidders are given technical scores which are very close to each other. This is often because the evaluators would like to play safe. In this case, the bid again becomes L1.

In the selection process it is important to have experts in the field who compliment the departmental officials who may often do not have sufficient subject matter expertise. Many departments do adopt SME. But the SMEs are often selected often based on their willingness to give free/ low cost service and readiness to say yes and not on the basis of the quality of expertise. We can’t expect much value addition in such cases.

Then some departments started experimenting with outcome oriented contracts with service providers. It is a brilliant idea in theory. Even in this case most of the departments mess up. Let us see how. To make outcome oriented project a success, there are two critical pre-conditions. (i) There should be clear articulation and agreement on specific outcomes and milestones. (ii) Achievement of outcome requires that both the client and the service provider play their role on an agreed upon schedule.

But in case of most government projects both the above preconditions are not met. Firstly the outcomes are not clearly articulated. Often they are described very broadly which could be interpreted in different ways. Such vague definitions lead to so much scope creep that the service providers lose significantly. Secondly the departments fail so badly in meeting their part of the deal. Often there is significant delay / failure in giving timely approvals, giving input by users, providing feedback on proposed solutions, signing off on specifications and so on. This lead to significant delay, scope creep and increase in required effort. Taking both these together for most of the service providers government projects are loss leaders. Because of this, many good and reputed IT service providers are very cagey in bidding for government project and keep away from government projects in most cases.

It is evident that unless the Digital India 2.0 addresses these above implementation issues it will not be able to do any better. It can be seen from the above that n normal government processes are not capable of handling transformational projects. It has never been designed to support innovation or flexibility or agility that are essential ingredients for successful implementation of transformational projects.

One obvious solution such limitation is to carve these as independent projects and hand these over to a Special Purpose Vehicle (SPV) which has been suitably structured with sufficient flexibility to take nimble decisions and relevant mid-course corrections when needed. It is also important to have the right kind of leadership, team with relevant expertise and experience and also a supervisory body that recognizes the different approach needed for these SPVs to succeed. Especially the leadership vision and courage to take decisions will be very critical. We have seen examples of such successes. But unfortunately we see that even when SPVs are established the bureaucracy involved in the establishing these SPVs build-in structural limitations that will restrict/ prevent the nimbleness of the organisation and or install unimaginative bureaucrats to its leadership which completely vitiates the ability of these SPVS to make any significant difference.

I hope the focus of the new PMO has on implementation will galvanise the various departments towards better performance.

Related Reading

If wishes were horses

“Exogenous and blind interpretation of statutes, topped with hustled implementation of laws leads only to more turmoil and less productivity.”  ― Henrietta Newton Martin

Aadhaar or Not?

The total number of Aadhaar enrollment has reached a level of around 600 million. There are serious debates in the public domain about use of Aadhaar as mechanism to establish and verify identify for various subsidies and benefits extended to the residents of this country. Let us take a deep look at the merits and demerits of this idea.

Every entity that provides any benefit or service to a person has a need to establish the identity of the recipient at the time of enrollment into the scheme. It would also want to verify if the same person is receiving the benefit/ service every time the service is availed. For this purpose different entities use different methods and different supporting documents.  Aadhaar comes out as the best identity proof on account of the following.

·         Most of the identity documents that are commonly used like PAN card, Voter Id, passport, electricity bill and so on are only enrollment proof for a specific service. Therefore this limits the cross section of residents who can have each of these documents. This makes it essential for every service provider to allow a variety of identity document resulting in higher cost and risk. Aadhaar is issued by UIDAI which has been set up only for the purpose of issuing an identity documents to every resident. This makes it possible for every resident to receive an identity documents.

·         Aadhaar has established a centralised system and a standard process that is accessible throughout the country to verify the identity document submitted by the recipient of the service. This makes it easy for every service provider to establish uniform but strong verification mechanisms instead of establishing multiple verifications for various identity documents.  No other identity document has such a seamless verification process in place (many of them don’t give a facility to verify from the source if the identify document has been truly issued by the issuing entity) which makes it possible for the unscrupulous to get away with forged identity documents.

·         The above process also significantly reduces the cost and risk of identity verification.

Every service/ benefit provider could want to ensure that same person does not access the service under multiple identities. Aadhaar issues a unique number to a person supported by extremely strong biometric technology to ensure that one person cannot have multiple identities. The current practice of establishing uniqueness with demographic data like name, father’s name, age etc  is quite weak in comparison with this. No other identity document has such strong de-duplication mechanism in place to ensure that same person has multiple identities

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The issuing authorities for the various documents used as proof of identity have established their channel for enrolment to meet their requirement and they do not cater to the need and right of every resident to receive an identity document. For example voter id is issued to eligible voters. PAN is a tax id and tax department has no incentive to extent this as a service to all residents. Since UIDAI is established as an entity to issue identify document, it has established extensive channel for issuance and verification and is in the process of further extending this channel.

This helps any entity which has to uniquely identify a person to save significant cost and effort in the identity verification process.  Building on this Axis bank now has introduced scheme wherein an individual can walk into any Axis Bank Branch, give his / her UID and after verification of the same, the banks issues an account without any further document.  Many service providers are figuring our innovative application of this idea. With more than 600 million cards already established we can soon witness wider adoption.

But let us be clear; only thing Aadhaar can guarantee is a unique identity, nothing else. Not citizenship, not right for any entitlement. For any of these you will need other mechanism. So we should judge and decide based on what Aadhaar can do and its relevance, and not what it cannot!

“No one  can stop an idea whose time has come” Victor Hugo

Reforms in Tax Administration

[This is an excerpt of my speech at the Central Excise Day Celebration published by Chief Commissioners of Central Excise and Service Tax Mumbai and Western India Regional Council of The Institute of Chartered Accounts of India. February 2014]

The fundamental role of tax department always has been to raise revenue for the government. Over the recent past there has been fundamental shift in the working of tax administration. Tax administration is attempting see its role as an enabler in helping the citizen to comply with the tax laws than an enforcer extracting funds. Thus it has been trying to achieve balance both in taxpayer service and in enforcement. Towards this it has to give equal importance to making tax avoidance painful and making tax compliance easy.

Today’s rapidly changing environment is adding further complexities in tax administration. Growth in international trade and commerce driven by globalisation is a major contributor to this complexity. Goods and services are produced in one country using inputs from a number of other countries and consumed in a third set of countries. The management and ownership of these entities are also spread across the world. Identifying the taxability and fair computation of taxes become a cumbersome and complicated matter. 

The other challenge is related to taxing of online transactions. With the trade happening completely in the virtual world there is a need to revise and refine the laws and rules for fair tax computation and easy and practical enforcement. Similarly, the development of tax shelter products and use of tax havens is another challenge, which emanates from globalization. The new technology solutions and boundaryless commerce open new avenues of frauds and tax evasions to the unscrupulous

Tax Reform has to be seen from this paradigm shift in landscape.

There are various factors that should be taken into account in this reform process They include:

a.      Simple tax system to facilitate administration and reduce compliance cost: It has been proven across the world that simple tax systems will improve compliance and make tax administration more efficient. A simple tax system will have few taxes, limited number of rates for each tax and limited exemptions. Forms and Procedures would be simple. Information required on tax forms would be kept to a minimum and readily available from taxpayer’s books and records. Taxpayers, to the extent possible, may not be asked to present data that would require them to keep special records for tax purposes.

b.      Taxpayer Communication: A well thought out communication strategy is a key element of taxpayer service by making information available to and addressing concerns of the taxpayers and business community

Objectives of Communication Strategy: The broad objectives are           

                                                          i.             Complete coverage: Ensure communication reaches all potential taxpayers

                              ii.           Uniform understanding: Ensure there is uniform understanding of  Laws and compliance across all taxpayers

                                 iii.             Mobilise taxpayers community for registration and voluntary compliance by preparing an environment to overcome  apprehensions at the taxpayer’s end

                                               iv.            Sustain the momentum: Reassure and amplify positive experiences of registration and voluntary compliance to interest and excite large taxpayer community to follow suit

Channels: Today multiple channels are available to reach the citizen. The department should have a well thought out strategy to use these multiple channels instead of just limiting to statutory publication in official communiques..

In addition there should be a channel to provide reliable answers to frequently asked queries and doubts that would be generated by the public awareness campaign

c.       Taxpayer Service: The quality of taxpayer service will be a significant determinant of the taxpayer compliance. Taxpayer services shall adopt a customer centric approach and shall foster to establish the following:

                                            i.             Consistency of service between what is expected by taxpayer and what is perceived by tax authority.

                               ii.             Translation of service expectations into service specifications

                                                iii.             Adherence to service specifications consistently during service delivery

                             iv.             Consistency of service delivery with taxpayer communications

The elements of taxpayer service will include:

Taxpayer Rights and Obligations: Taxpayers rights and obligations and the procedures for redressal of their grievances could be explicitly declared and published and adequately communicated

Ease in compliance: The policies, forms and procedures relating to compliances could be easy to understand and easy to comply with.

                                             i.      All key administrative processes including the procedure for taxpayer registration, tax payment, filing of tax returns/ grievances/ appeals and applications for rulings etc could be automated, reducing the need for manual intervention by the taxpayer and the tax administration to the barest minimum.

                                                ii.     The tax department should allow taxpayers opportunities to provide feedback relating to administrative policies and procedures.

                         iii.      The department could continuously strive to refine administrative processes from the Taxpayers’ perspective so as to minimise compliance burden

Service Level Standards: The department could publish service standards with respect to various services to taxpayers like assessment, grievance resolution, refunds and be accountable to honour these service standards. The extent to which these levels are achieved may be made a part of performance measurement for the department and it may be made available in public domain.

Reliable and up- to-date taxpayer information

                                                              i.      Provide taxpayer information (self)services – a real-time convenient online login-based secure access to taxpayer on its registration details (e.g., legal full name, physical address, date of incorporation, industrial sector), tax payment history, status of returns, refunds, etc, specific communications from the department  and with an online facility for query and grievance handling.

                                                            ii.      Up-to-date information relating to law, procedures and regulations could be made readily available to taxpayers in a simple and coherent manner through a mix of identified channels including online modes.

                                                          iii.      The department could consistently deliver quality information and respond to inquiries and requests from taxpayers in an accurate and timely fashion to  help  them meet  their obligations;

                                                           iv.      The department could aim to resolve Taxpayer queries at the first point of contact, avoiding the need for subsequent contacts on the same subject

Assured confidentiality and privacy of taxpayer information

                                                              i.      The department should use taxpayer information only to the extent permitted by law;

                                                            ii.      Privacy of taxpayer information will  be  protected  to  a  level consistent with the standards applicable to comparable public and private sector organisations such as banks

Time bound Grievance redressal A Grievance Redressal Mechanism to be made available to taxpayers for time bound redressal of grievances.

Education: Continuous education of various stakeholders is critical for any tax administration. Therefore it is imperative to have a focused effort in educational initiatives that creates an ecosystem to help augment the department’s capacity to maximise the outreach.

Certification Program: The department could consider establishing a certification with programs tailored for finance professionals responsible for tax compliance, tax agents etc. This will help in ensuring a certain level of learning and provide a bench mark to measure level of expertise.

d.      Enforcement and Compliance Management: Simple tax system, ease of compliance, self-assessment and high quality taxpayer service will make compliance painless and incentivize compliance. Equally important are means to make non-compliance painful which is an equally important lever for better compliance.

                                            i.      A robust compliance management mechanism will identify the risks associated with non-compliance, and strategies should be developed to mitigate and counter those risks.

                                          ii.      These may involve interventions by way of profiling risk, auditing, developing third-party information sources, general anti-avoidance efforts, prosecution and proposals for legislative change.

                                        iii.      The department should monitor compliance activity to detect and deter noncompliance.

Development of information system to counter risk to revenue

A well designed information system with the provision to receive and integrate financial data from diverse sources and develop risk profiles using data mining and other profiling techniques will be the main feature of compliance risk management strategy. The department could take steps to integrate the taxpayer data in different tax systems. It could also take steps to identify data sources in public domain and define legal framework to access to key third Party information (like database of ministries/departments dealing with corporate affairs in the country, relevant databases of regulatory authorities in the sectors of interest, etc)

Tackling Tax Fraud

The department could adopt a zero tolerance policy for tax frauds. For this purpose it should-

                                 i.            Design and implement efficient strategies to deal with organised tax evasion and fraud and prosecute under criminal law persons found involved in fraudulent activities. In such cases it will use powers of search of business premises and arrest of suspects.

                               ii.            Tax frauds require specialised multi-disciplinary investigation skills including tax investigations, computer forensics, and criminal investigations etc. Therefore, the department may set up specialised Enforcement Unit having the necessary skill sets for investigation into tax fraud and recovery of difficult tax debt.

                              iii.            The findings of investigations into tax frauds could also be used for re-determination and recovery of evaded tax liabilities.

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e.      People In the current environment with fast-paced change in the business domain and technology tools it is important that the department has cohesive strategy to attract, develop and retain resources with the relevant skill set so as to provide competent and trained managers and staff with high professional and ethical standards. It should also provide continuous skill up-gradation of its employees. This could  to a great extent limit incentives and opportunities for rent seeking and inappropriate behaviour

Emphasis will have to be placed on proper and continual training and development of the personnel for achieving professional competence for dealing with the complex issues in the legal landscape. Training programs should lay emphasis on behavioural aspects involved in dealing with taxpayers with courtesy, fairness, and consideration..

The tax administration thus should evaluate these dimensions on a regular basis and reform the tax administration if it has to stay relevant and effective. 

Making the Elephant Dance

We once had a government that tried to do everything by itself. In addition to the business of governance, it also actively dabbled in bread making to aircraft production and banking to hotels.  Over a period of time it has accepted that it should focus on its core responsibility of governance and has attempted to move out from non-core sectors. Therefore it has, in the recent past, started using private sector capital and private sector involvement to augment and strengthen governance and to provide public good

Some of these partnerships have been successes and some failures.  The success and failure of such joint initiatives depend on many factors.  The willingness of the key bureaucrats driving the project to take bold decisions and the scruples of the private sector partner are two critical factors of success.

The worst combination is when we have an indecisive officer and a scrupulous service provider. In this case the project will suffer and the service provider will suffer humongous loss. This is the reason why many private sector companies desist from working for government.

The next worst combination is when we have an officer who is decisive and absolutely corrupt teaming with an unscrupulous service provider. In this case they will clean the tills and the project will suffer.

The best result is when there is combination of decisive and result oriented officer and scrupulous service provider.  This is a road fraught with risks because this will involve judgement calls and judgement calls involve calculated risks based on information available at that point of time. But unfortunately these judgment calls often are often misinterpreted. This then leads to both parties being accused of the personal agenda behind their actions.  They get equated to the worst combination described above. Both end up suffering for the decisions they have taken. That is why this is a rare combination. However what we need today is this combination.  

This is less of an issue when outcomes of the envisaged projects are very clear and the scope of private sector participation can be articulated un-ambiguously. In these cases it will be possible to develop a clear contract and monitor the performance against the clear milestones in the contract. However in projects which are transformative in nature this becomes all the more critical. In this kind of project it will not be very easy to clearly develop the implementation plan and identify clear milestones. Therefore there will be many occasions, based on ground realities, when judgement calls are required to be made and course corrections are required to be effected. In such cases the combination of visionary and courageous leadership from the government and scruples of the service provider becomes very critical. 

In typical government procurement such a combination which will effectively enable active management will be very difficult to implement. This is the reason why many of the transformative projects in Private Public Participation fail.

This is especially true for IT projects. Today many top-notch IT companies are unwilling to work with government because they feel that government does not understand or appreciate this dimension. On account of this blindness on the part of the government buyer, for honest service providers government projects are loss leaders. Especially with the alternate business opportunities recovering around the world it will be difficult for the government to to attract good IT companies to take serious interest in the e-enablement of government projects.

The most effective way to handle such transformative projects is to carve these as independent projects and hand these over to a Special Purpose Vehicle (SPV) which has been suitably structured with sufficient flexibility to take nimble decisions and relevant mid-course corrections when needed. It is also important to have the right kind of leadership, team with relevant expertise and experience and also a supervisory body that recognizes the different approach needed for these SPVs to succeed. Especially the leadership vision and courage to take decisions will be very critical.  Delhi Metro is a very visible example of a successive implementation in this model.

There are many more transformative ideas that are awaiting such interventions especially in the area of digital transformation. We hope that the clear mandate the government has this time will help them take this path with more confidence. 

“Planning is helpful. If you don’t know what you want, you’ll seldom get it. But, no matter how well you plan, you will fare better if you expect the unexpected. The unexpected, by nature, comes unseen, unthought, unenvisioned. All you can do is plan to go unplanned, prepare to be unprepared, make going with the flow part of your agenda, for the most successful among us envision, plan, and prepare, but cast all aside as needed, while those who are unable to go with the flow often suffer, if they survive.”   David W. Jones, Moses and Mickey Mouse

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