Government looking at Shome panel report to simplify tax system: FM Jaitley

NEW DELHI: Days before his third budget, finance minister Arun Jaitley said the government is looking into recommendations of Shome committee for simplifying tax administration.

Tax reforms have been high on the government agenda as part of its drive to improve ease of doing business and India’s perception as an investment destination. The budget is expected to take the process forward.

“The Shome Committee report has given several recommendations that we are at a very advanced stage of looking into. It has suggested reforms in tax administration,” he said, addressing Platinum Jubilee celebrations of the Income Tax Appellate Tribunal (ITAT) on Monday.

Jaitley also said a committee under Justice RV Easwar has submitted its first report on simplifying the Income-Tax Act. “Laws must be simple. Even if you have a large number of assessees and a large population, if your laws are simple, the possibility of excessive litigation itself does not arise,” he said.

One of the reforms expected is kickstarting the gradual reduction of corporate tax from 30% to 25% over four years, along with removal of tax exemptions announced in the previous budget. Jaitley said this would make the system cleaner and simpler and ensure “oppressive taxmen do not hover over us”.

The Parthasarathi Shome-headed Tax Administration Reform Commission (TARC) was set up by the previous UPA government to “review application of tax policies and laws in the context of global best practices, and to recommend measures for reforms required in tax administration.” The committee has submitted four reports outlining many administrative and law reforms. It has recommended a complete recast, beginning with abolition of the post of revenue secretary, the merger of CBDT and CBEC to a broader use of Permanent Account Number (PAN).

Business chambers have also called for the implementation of the TARC suggested reforms in their pre-budget consultations with the finance minister.

Easwar Committee’s draft report last week suggested higher threshold limits for various tax deducted at source (TDS) and halving of withholding tax for individuals and Hindu undivided family.

Jaitley said a simpler system would reduce appeals to ITAT and further efforts would be made to bring down arrears.

“I do hope that with all these changes, an improved performance in the tribunal which you are endeavouring to get, the arrears will be low, our tax buoyancies will be higher and harassment to the assessee would probably be least,” he said, outlining the various reforms announced by the government.

“More and more returns are online. Queries are being addressed online, answers can come online and human interaction in those assessments itself is coming down,” said before pointing out that these will help eliminate corruption. Jaitley said a citizen cannot be unfairly taxed, even though taxation serves a very noble purpose of enabling the state to carry on developmental activities.

He added: “Taxes which are payable are certainly payable and taxes which are not payable can never be levied. Nobody can come up and say that on grounds of compassion, exempt or liberate me from the responsibility of paying taxes. There is no place for compassion.

“At the same time, the plea that the state needs more money and therefore the taxation laws should be liberally construed in favour of state is also not a plea which is available.”