Issue of Tax Compliance in Budget 2008
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On 6th of December 2007, the Finance Ministry announced the issue of tax compliance in budget 2008. It is learnt that the tax payers would be benefited reviewing the direct tax rates and increasing the voluntary compliance.
The level of tax compliance was increasing significantly for the last two or three years. During the fiscal year 2006-07, almost 31.9 million tax payers of India have filled their income tax returns which, compared to the developed countries, is not an exciting figure at all. Moreover, the number of tax payers who are partially filling their income tax returns are increasing day by day. By dong this the they save themselves from the scrutiny of the revenue authorities and extra tax claims.
But the government has announced that it will focus more on the tax compliance issues. The FinanceMinistry will not increase the maximum marginal rate of personal income tax further, for it may result in voluntary compliance. The Advisor to the Union Finance Minister of India has told that, the government will now be able to keep track on the ups and downs of voluntary compliance. Maximum marginal rate of personal income tax will be 30%. However, the base of the taxpayer is not large as it ought to be because a big portion of the population of the Indian economy lie below the poverty line.
The economic growth of India has been on the higher side for the past few years and that’s why the government is able to include almost eight lac new tax payers in the tax net. However, the government has not mentioned the proposals related to taxation, but it has been understood that more transactions would be added into the scope of the Annual Information Return and Permanent Account Number(PAN).
Other measures will include the newly formed Computer Aided Scrutiny System that is used for tax scrutiny. The Tax Deducted at Source (TDS) returns for the companies will be the next important source to expand the tax net. Already, the government of India has made the PAN compulsory for all tax calculations. The government also wants to develop a new tax code to simplify the overall tax structure.
