Fixed revenue target turns good taxpayers into bad

This sounds almost like the famous Gresham's Law which is, "bad money drives out good money from circulation". Fixed revenue target creates a situation where good taxpayers are forced by the Revenue to pay more tax in different ways which may be refundable later, but in actual practice refunds are not given due to protracted legal hurdle resulting in huge loss of interest. To avoid such forced payments, the good taxpayers resort to measures which they would not have resorted to, had the revenue target not been the aim of the Revenue officers. If there was fair play on the part of Revenue, most taxpayers would also resort to fair pay.

While the statement that fixed revenue target turns good taxpayers into bad has come from a very highly placed economist-advisor, it only confirms what the taxpayers and the fiscal analysts always thought it to be. Now that the financial year is over, the Revenue officers and the taxpayers have heaved a sigh of relief, as we can see from various entries in Facebook.

The defect of a fixed revenue target is that it is fixed in the beginning of the financial year with a certain assumption of buoyancy in the economy, in terms of growth in manufacture and service sector, level of inflation, international price of crude oil and rate of foreign exchange. All these assumptions do not remain valid throughout the year. While they change, the revenue target is not changed. So the officers are faced with the Herculean task of making both ends meet. This they do by resorting to different types of unfair means such as (i) issuing show-cause memos demanding extra duty where there is no sufficient justification, (ii) all demands are confirmed in adjudication rejecting the plea of the taxpayer outright without paying any heed to their arguments, (iii) filing appeal against any adjudication order where the taxpayers' plea has been favourably adjudicated, (iv) resorting to the law of Unjust Enrichment against the taxpayer by issuing fresh show cause memo, (v) once again adjudicating against the taxpayer by rejecting the evidence placed by them, etc. The idea is to create endless litigation against the taxpayers which exhaust them financially and physically whereas the government lawyers make merry with increased litigation. In the meantime the Revenue officers are emboldened by such circulars as 967/01/2013-CX dated January 1, 2013, issued by the CBEC, which says that even if the stay petition is not disposed of, the recovery is to be effected. In practice, the Appellate Commissioners and tribunal do not dispose of stay petition for months and months. There are many reasons for that. The tax payer is not responsible for them. I know personally that there are larger number of stay petitions than the regular cases in tribunal in the daily cause list and a major part of the time of the tribunal goes in disposal of stay petitions. In the meantime, the Revenue threatens the taxpayers with dire consequences. This leads to corruption. It is also known that Revenue loses 85 per cent of the cases at the appeal stage in tribunal, high courts and Supreme Court. All these situations described above explain how even good taxpayers ultimately are forced to resort to bad methods much against their wishes.

The solution to the problem is not so easy but I can make a few suggestions. The finance ministry must revise the revenue target if the economy is not buoyant. It must see the reality and not try to bridge the fiscal deficit by adopting draconian measures.

A moving target rather than a fixed target will help ease pressure on the tax administration to meet the target fixed at the start of the year. It is known that most countries have moved away from the static revenue target principle to a moving target depending on the performance of the economy.

The finance minister should make a statement that it is only the due revenue which should be collected and not revenue by applying undue force. This does not mean that tax dodgers will not be punished. This only means that fair means will be adopted so as not to harass the good taxpayers.

smukher2000@yahoo.com