Taxing Matters : Action, Not Mere Perception, Is The Need Of The Hour

Addressing a conference of chief commissioners and director-generals of income-tax on 29 May, finance minister Yashwant Sinha expressed anxiety over fall in income-tax collections and asked the department to improve the collection by widening the tax-net and tapping people who advertise in the yellow pages, maintain bank lockers and stepping up search and seizure operations.

Mercifully, he did not advocate one-by-eight scheme by including these two for compulsory filing of tax returns!The finance minister should himself take the responsibility for the tax target being not met. He should ponder whether there is any scientific method of setting tax collection targets.

It is not clear how the target for 2002-03 has been set at Rs 91,000 crore against the collection of Rs 68,803 crore during 2001-02. He should also take stock of the provisions for exemptions, incentives and deductions he has introduced in the Income Tax Act by his five Finance Acts and work out the yearly drain of revenue because of these.

As a student of class IV, I was taught by my arithmetic teacher that if in a reservoir water is filled by one-inch diameter pipe and is simultaneously emptied by another pipe of half-an-inch, it would never get filled.

The finance minister should accept this simple proposition and not blame tax officials for the fall in collections. Most concessions given are for political considerations, not economic ones.

Another factor responsible for the low collection is the almost giving up of returns scrutiny work and diverting the workforce to management work. The finance minister cannot say he was not aware of this situation.

The two new ways of tapping tax evaders are going to be another wild goose chase. Most of the people proposed to be targeted are expected to be taxpayers or people who are tax exempt like farmers. The one-by-six scheme too has not brought many big tax evaders to the net. It has resulted in increase in