New faceless tax system
Prime Minister Narendra Modi on 13 August 2020 launched the platform for 'Transparent Taxation – Honoring the Honest' aimed at easing compliance and expediting refunds, benefiting honest taxpayers. Three main features of the platform are faceless assessment, faceless appeal and tax payers' charter, PM Modi announced.
The Prime Minister said focus is on making the tax system people-centric and public friendly, “banking the unbanked, securing the unsecured, funding the unfunded and honoring the honest.”
- The four factors responsible for changes in the taxation system were policy-driven governance, belief in people's honesty, the use of advanced technology and efficiency in bureaucracy. Where there is complexity, there is a problem in compliance.
- A persistent issue the current administration has received criticism on is the issue of taxation, despite genuine attempts at improving the tax structure.
- India's tax administration has been known for tax harassment, where overzealous well-intentioned officials while raising tax revenues, have dampened growth and at times done more damage than good.
- The government introduced faceless income tax assessment to reduce the scope for corruption and overreach by officials.
- The issue of alleged tax harassment by officers gained much attention in India after VG Siddharta, the founder of India's largest coffee shop chain, committed suicide in July and left behind a note accusing tax authorities of persecuting him.
- Tax officials are pushing back against the new faceless tax assessment program. They see problems in the lack of consultation and inadequate resources to implement the changes.
- In a joint letter sent to the Central Board of Direct Taxes (CBDT) this month, representatives of the Income Tax Employees Federation and the Income Tax Gazetted Officers' Association voiced their displeasure.
- Tax officers told Reuters that faceless tax assessment may reduce tax collection and raise pressure on officers that are under stress to meet lofty tax targets for the current fiscal year.
- The CBDT has given a framework and put in place a system in the form of this platform, a transparent, efficient and accountable tax system. The platform will use technology such as data analytics and AI.
- This adds strength to our efforts of reforming and simplifying our tax system. It will benefit several honest taxpayers, whose hard work powers national progress.
- Since 2014, there have been consistent attempts at revamping the tax administration. The launch of the platform carries forward the journey of direct tax reforms, following the several measures that have been taken by the CBDT to aid taxpayers.
- The current number of taxpayers in the country is significantly low at only 1.5 crore. The focus of the tax reforms has been on reduction in tax rates and on simplification of direct tax laws.
- The new platform launched has major reforms like faceless assessment, faceless appeal and taxpayers charter.
- The facility of faceless appeal will be available for citizens across the country from September 25.
- The Budget for 2020-21 fiscal unveiled on February 1, had announced a 'taxpayer charter', which is expected to have statutory status and will empower citizens by ensuring time-bound services by the Income Tax (I-T) department.
- The charter will ensure trust between a taxpayer and the administration and reduce harassment, as well as increase efficiency of the department.
- The Central Board of Direct Taxes (CBDT), which is the top decision making body in direct tax matters, administers personal income tax and corporate tax.
- The government has for long talked about various plans — ranging from cashback or rewards under GST (goods and services tax) for those using digital modes of payment to make purchases — it has so far failed to implement them.