Will HLC level with reality?

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In his 2014-15 Budget speech, the Union finance minister had announced that as an administrative measure, he proposed to set up a high-level committee (HLC) to interact with trade and industry on a regular basis, and ascertain areas where clarity in tax laws was required.

Based on the recommendations, the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) were to issue appropriate clarifications where necessary on the tax issues, within two months, he had said. Last week, he set up a three-member committee for that purpose.

This consists of a former chief economic advisor at the ministry, a retired member of the Settlement Commission for income tax (I-T) and wealth tax matters, and a retired director-general (audit-customs) of CBEC. It will be assisted by two officers not below the rank of joint secretary/commissioner, one each from the I-T and customs & central excise wings. It may consult experts and tax professionals from outside and invite officers from elsewhere for interaction.

The task of identifying ambiguity in tax laws and issuing clarifications or amending the rules is that of the revenue department in the ministry. The Institute of Chartered Accounts of India regularly apprises CBDT of the clarifications or changes in law required to minimise litigation. Regional advisory councils advise the chief commissioners of central excise and customs on problems at the operating levels. Numerous case laws show up provisions that can be interpreted differently. Associations of industries and taxpayers regularly point to lacunae in legal provisions. Many articles appear in newspapers and other publications, critically examining various provisions and offering suggestions.

CBDT and CBEC have to regularly study all the material available and act. That often does not happen and there's a widespread perception that neither is interested in removing ambiguity. So, the idea of an independent institutional mechanism to find areas where clarity is required in tax laws looks good. However, putting retired bureaucrats to do that breeds scepticism on whether the desired results will come. Even so, it is better to wait for some time and see what this new committee does.

The so-called HLC can succeed if its members regularly travel to various parts of the country and listen to what taxpayers say in open house meets. The members must remember that many executives and managers at the operating levels air their views rather freely in such meets, while rarely putting their views in writing. It is easy to get interactive sessions organised through industry associations. Merely relying on what officers of the revenue department or some chosen experts say will not help the committee come out with meaningful recommendations.

On its part, the government must attract talent in this committee. Its present remuneration is enough to attract only retired people. If it wants busy professionals to contribute meaningfully, it should not hesitate to respect their time and expertise. Otherwise, this committee, like many others, will fall short of expectations.

email: tncrajagopalan@gmail.com