Centre acts against taxmen over strong-arm tactics

NEW DELHI: The government has decided to have zero-tolerance to strong-arm tactics by tax officials. In a move that is expected to set an example for the department, which is trying to project a friendlier image, the finance ministry has decided to act against officials who served a notice to a leading bank at the end of the last financial year to mop up taxes, only to refund the money at the start of the new financial year.

Officials said the government is keen to ensure that the practice of making taxpayers cough up funds to meet targets or deny refunds to shore up higher collections will have to end. A source said the leading lender from Mumbai was asked to pay a few thousand crores at the end of the year. Given the pressure on bank balance sheets due to rising bad loans, lenders were in any case under pressure.

The finance ministry has taken a stern view on this issue. "The government will not tolerate these kinds of methods and it is taking departmental action," said a source. In the past, such practices were not frowned upon, resulting in them becoming the norm.

A friendlier tax regime, which means an end to the use of arm-twisting methods, apart from easier and quicker refunds, e-governance and fewer disputes are seen to be key ingredients for the revenue department's makeover after global investors complained of " tax terrorism".

In fact, during a recent meeting with top tax officers, PM Narendra Modi asked them to be friendlier with taxpayers and yet be stern with those avoiding payments. Already, refunds have been quicker with the income tax department clearing the backlog for the past few years. In fact, low refunds during the current fiscal have also been responsible for a 25% rise in direct tax collections in June.