Project Leader: Mr. Rajiva Ranjan Singh
Research Team: Anandita Bagchi, Stuti Manchanda, Mukesh Butani, Sanjay Kumar, K. R. Sekar and Harish Kumar (External Consultants)
Commencement: May 2014
Funded by: British High Commission
The Indian tax administration has, since long, been facing the challenge of a small taxpayer base, and the full potential of targeting tax evaders through audit and scrutiny is not achieved. The basic approach of many tax administrations is to reduce the tax gap by bringing about a shift from the ‘command and control’ model to the ‘voluntary compliance’ model. Voluntary compliance depends on the availability of information bringing about certainty regarding taxes to be paid, certainty in determining without any ambiguity the amount of taxes payable and the convenience to pay such taxes with minimal compliance burden. In order to achieve this, studies are often carried out to understand taxpayer behaviour towards compliance. Categorisation of taxpayers is done which enables the tax administration to deliberate and formulate policies in order to ensure compliance by taxpayers.
This study builds on an earlier study completed at ICRIER in 2011. As part of the field work for this study, a team of six senior officers from the Central Board of Direct Taxes and the Central Board of Excise and Customs were taken on a week’s study trip to Her Majesty’s Revenue and Customs (HMRC) to interact with various levels of HMRC officers as well as tax practitioners. The team had useful interactions in the areas of use of technology in widening and deepening of tax base, tax data analysis, and working of large business units. The Central Board of Direct Taxes has taken a decision to take forward the learnings and recommendations from the visit of the study team for further implementation.
The study covers issues of widening of taxpayer base, risk assessment and deepening of tax base, tax data analysis, transfer pricing documentation and comparability adjustments, recovery of taxes, alternate dispute resolution mechanisms, and taxpayer information services. It suggests non-intrusive technology based practical solutions in these areas that equip administrators to implement changes that may ultimately improve the business environment and increase tax revenue for the exchequer.