One of the greatest expectations with regard to any new invention or technology is the belief that the world is waiting for it with open arms and an eager welcome. The reality is often the exact contrary. There are hardly any new ideas, art or solutions that were given an immediate and enthusiastic reception when they were first introduced. This is true of the incandescent bulb Edison invented or telephone by Alexander Graham Bell or the introduction of demat trading in Indian capital market.
They all began with a sense of euphoria among a few who introduced it, accompanied by a buildup of media expectation followed by disappointment that the concept has not caught on like wild fire. It took some time for the import of the idea to percolate down, from the few early adapters to the public at large, through a gradual process of churning among a whole host of people and processes.
The same is true for Tax Information Network (TIN) that has been established by NSDL on behalf of Income Tax Department. The core of TIN is creation of a consolidated tax ledger for each taxpayer giving the complete details of tax deducted (withholding tax) on his behalf by all deductors (entity withholding tax) and the tax deposited by him directly with the banks.
This consolidated tax ledger is expected to help the tax department to ensure that the tax credit given to the taxpayer is indeed against funds received into the government coffers.
This also aids the taxpayer to verify, well in advance, whether the deductors and the banks have done their jobs properly to reflect a complete view of his tax credits in the tax ledger. Such a comprehensive tax statement can remove the need for the taxpayers to collect Form 16s (Certificates giving details of tax withheld from the entity withholding the tax) from all the deductors who have deducted tax for getting credit of all the TDS.
TIN was inaugurated in January 2004. First challenge was to put in place the systems, procedure and infrastructure for the 13000 odd tax collecting bank branches for uploading to the TIN central system, details of the tax challans (for tax payment instrument identification) on a daily basis.
The second challenge was to establish a nationwide network of facilitation centres to interface with the taxpayers and also an online facility for the deductors to furnish their returns directly. (This infrastructure had to take care of the difference in ICT infrastructure of the large and small companies across the country)
The central system was also to be equipped to match the TDS returns with the challan details (details of tax payment instruments) so that the tax ledgers giving the details of all incomes and tax deducted could be created.
Establishment of infrastructure is the easier part. But ensuring high degree of compliance and data quality is an uphill task of enablement, education, feedback and enforcement. It needs conviction, patience and discipline. It also requires ability to keep the big picture in mind and taking one incremental step at a time to reach the ultimate goal. It is easy to lose heart or get impatient on the way and run after quick-fix solutions.
Like any other project that attempts significant transformation, TIN is also confronted by such woes. There were many who were ready to condemn this. This crowd consisted of many varieties. Some of them were taxpayers and taxmen getting scared of the increased transparency and the resulting ‘loss of flexibility’ in tax compliance and tax enforcement. Some were those who felt that they lost the lime light in this new initiative. There was turf war and professional jealousies. Then there were those who were simply impatient and felt disappointed that the change did not materialize like the transformation of Cinderella and they were too eager to keep tinkering which was sometimes counterproductive.
The encouraging thing is that in spite of these, the project is going forward. This was possible only on account of the diligent and patient efforts by some of the officers of the department. The Directorate of System being the nodal agency for this project naturally took the lead. Many officers of the department from the field also played active role. Office of the Principal Chief Controller of Accounts and the Reserve Bank were some of the other agencies who extended helping hand.
One of the most significant initiatives by the department in this direction was the efforts it took to garner support from the taxpayers in improving the compliance and data quality.
TIN provides an online facility for the taxpayers to view a comprehensive view of their tax credits over the net. But many taxpayers were unaware of this and many did not feel it important to refer to this as they continued to get their credit on the basis of the certificate provided by the deductor.
The department decided to address this issue in a taxpayer friendly fashion. It commenced forwarding of the tax credit statement by email and letters for the current and past year directly to the taxpayer with explanation on what to do to ensure that all the eligible credits have been accounted.
This has helped to educate the taxpayers that in future they may have little difficulty in getting tax credit if they ensure that their tax credit statement is correct and complete.
Similarly the reminder letters that TIN forwards to the deductors have helped those forgetful souls about their responsibility under the law to deposit tax deducted and file returns. The central system of TIN where all the returns were consolidated made it easier for the Department to track the defaulters and take appropriate action.
Inconsistency letters sent by TIN to the deductors is helping the deductors to identify their mistakes and to take necessary precautions to prevent such errors in future. It also reminded those deductors who paid TDS but did not file returns and those who filed returns but did not deposit tax. This information is also available online helping the deductors to rectify their errors.
This is a total cultural change for the department. For the first time, instead of sending notices, the department is communicating with the taxpayer feedback on information related to tax credit it has with respect to each taxpayer. Advising him to verify whether it is correct and rectify errors, if any, much before the department look at these details with the eye of an enforcer and start taking actions.
These movements towards transparency and more automated enforcement have helped the tax collection effort of the government. As per newspaper reports, in the last three years (Till 2008) the direct tax collection grew by more than 30% per year overtaking the indirect tax collection first time in history. The contribution of these efforts in strengthening the tax administration was acknowledged in a public function in August 2008 by Shri P Chidambaram who was the Finance Minister of India.
I am sure that co-coordinated efforts from various stakeholders can help to provide a tax administration system that is efficient, effective and provides high standards of service to taxpayers, at the same time, collects the revenues required by law to fund necessary public services.
They all began with a sense of euphoria among a few who introduced it, accompanied by a buildup of media expectation followed by disappointment that the concept has not caught on like wild fire. It took some time for the import of the idea to percolate down, from the few early adapters to the public at large, through a gradual process of churning among a whole host of people and processes.
The same is true for Tax Information Network (TIN) that has been established by NSDL on behalf of Income Tax Department. The core of TIN is creation of a consolidated tax ledger for each taxpayer giving the complete details of tax deducted (withholding tax) on his behalf by all deductors (entity withholding tax) and the tax deposited by him directly with the banks.
This consolidated tax ledger is expected to help the tax department to ensure that the tax credit given to the taxpayer is indeed against funds received into the government coffers.
This also aids the taxpayer to verify, well in advance, whether the deductors and the banks have done their jobs properly to reflect a complete view of his tax credits in the tax ledger. Such a comprehensive tax statement can remove the need for the taxpayers to collect Form 16s (Certificates giving details of tax withheld from the entity withholding the tax) from all the deductors who have deducted tax for getting credit of all the TDS.
TIN was inaugurated in January 2004. First challenge was to put in place the systems, procedure and infrastructure for the 13000 odd tax collecting bank branches for uploading to the TIN central system, details of the tax challans (for tax payment instrument identification) on a daily basis.
The second challenge was to establish a nationwide network of facilitation centres to interface with the taxpayers and also an online facility for the deductors to furnish their returns directly. (This infrastructure had to take care of the difference in ICT infrastructure of the large and small companies across the country)
The central system was also to be equipped to match the TDS returns with the challan details (details of tax payment instruments) so that the tax ledgers giving the details of all incomes and tax deducted could be created.
Establishment of infrastructure is the easier part. But ensuring high degree of compliance and data quality is an uphill task of enablement, education, feedback and enforcement. It needs conviction, patience and discipline. It also requires ability to keep the big picture in mind and taking one incremental step at a time to reach the ultimate goal. It is easy to lose heart or get impatient on the way and run after quick-fix solutions.
Like any other project that attempts significant transformation, TIN is also confronted by such woes. There were many who were ready to condemn this. This crowd consisted of many varieties. Some of them were taxpayers and taxmen getting scared of the increased transparency and the resulting ‘loss of flexibility’ in tax compliance and tax enforcement. Some were those who felt that they lost the lime light in this new initiative. There was turf war and professional jealousies. Then there were those who were simply impatient and felt disappointed that the change did not materialize like the transformation of Cinderella and they were too eager to keep tinkering which was sometimes counterproductive.
The encouraging thing is that in spite of these, the project is going forward. This was possible only on account of the diligent and patient efforts by some of the officers of the department. The Directorate of System being the nodal agency for this project naturally took the lead. Many officers of the department from the field also played active role. Office of the Principal Chief Controller of Accounts and the Reserve Bank were some of the other agencies who extended helping hand.
One of the most significant initiatives by the department in this direction was the efforts it took to garner support from the taxpayers in improving the compliance and data quality.
TIN provides an online facility for the taxpayers to view a comprehensive view of their tax credits over the net. But many taxpayers were unaware of this and many did not feel it important to refer to this as they continued to get their credit on the basis of the certificate provided by the deductor.
The department decided to address this issue in a taxpayer friendly fashion. It commenced forwarding of the tax credit statement by email and letters for the current and past year directly to the taxpayer with explanation on what to do to ensure that all the eligible credits have been accounted.
This has helped to educate the taxpayers that in future they may have little difficulty in getting tax credit if they ensure that their tax credit statement is correct and complete.
Similarly the reminder letters that TIN forwards to the deductors have helped those forgetful souls about their responsibility under the law to deposit tax deducted and file returns. The central system of TIN where all the returns were consolidated made it easier for the Department to track the defaulters and take appropriate action.
Inconsistency letters sent by TIN to the deductors is helping the deductors to identify their mistakes and to take necessary precautions to prevent such errors in future. It also reminded those deductors who paid TDS but did not file returns and those who filed returns but did not deposit tax. This information is also available online helping the deductors to rectify their errors.
This is a total cultural change for the department. For the first time, instead of sending notices, the department is communicating with the taxpayer feedback on information related to tax credit it has with respect to each taxpayer. Advising him to verify whether it is correct and rectify errors, if any, much before the department look at these details with the eye of an enforcer and start taking actions.
These movements towards transparency and more automated enforcement have helped the tax collection effort of the government. As per newspaper reports, in the last three years (Till 2008) the direct tax collection grew by more than 30% per year overtaking the indirect tax collection first time in history. The contribution of these efforts in strengthening the tax administration was acknowledged in a public function in August 2008 by Shri P Chidambaram who was the Finance Minister of India.
I am sure that co-coordinated efforts from various stakeholders can help to provide a tax administration system that is efficient, effective and provides high standards of service to taxpayers, at the same time, collects the revenues required by law to fund necessary public services.
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