'Use research to weed out procedures encouraging corruption'

A high-level government commission has suggested that tax department undertake regular and periodic review to identify and weed out procedures that lead to corruption in the department.
In its fourth report, the Tax Administration Reform Commission (TARC) has also suggested that the tax research units for direct and indirect taxes-- Tax Policy Legislation (TPL) and Tax Research Unit (TRU) -- should be merged to form Tax Policy and Analysis (TPA) wing to ensure accuracy of Budget projections.
In order to deal with corruption in the tax department, the commission, headed by Parthasarathi Shome, suggested that "regular and periodic research be carried out to identify procedures that give rise to corruption".

The tax administration, it said, must continually undergo change to deal with the dynamic nature of the problem. "It can be highly dangerous if the public comes to doubt the integrity of tax personnel, as this directly influences the taxpayer's willingness to pay taxes."
It said that the asymmetry of information between officials and taxpayers, and the multiplicity of rules and their frequent changes, often make it impossible to ascertain whether a particular regulation is beneficial from the point of view of taxation.
Often, it said, "new tax procedures are used as a tool to harass and extract bribes because taxpayers are not adequately informed about them".

In order to make the Budget projections more balanced, transparent and trusted, the commission suggested that the CBDT and CBEC should maintain two forecasting systems, one for short term up to 6 months and the other for the second half of the fiscal.

"It is important that the tax forecasts are revisited on a regular basis as key economic variables such as GDP, inflation, short term and long term interest rates, employment growth etc are changing constantly," it said.
Such an approach, it added, will help in improving the accuracy of the forecast.
It also suggested that the officers of Indian Revenue Services (IRS) should publish a peer-reviewed research paper on topics of tax administration or tax policy before getting promoted in the grade of Commissioner.