In the present scenario, tax is a burden imposed by law. Since our present state rest on the Principles of Rule of Law, the tax administration does not remain a mere revenue collection exercise, it take the shape of administration of a branch of law. Thus the ideal taxation is execution of a well defined law with defined burden, legal-procedural-financial, on the subjects. When such law is administered by an inefficient and corrupt institution, it does not result in merely less collection of revenue but erosion of subject’s faith in the existence of Rule of Law.
The taxation law affects the economic interest of the nation. When such laws is inefficiently administered, when such laws are administered by corrupt bureaucracy, when the drastic nature of such laws threat the liberty of businessmen; it results in lower business confidence, less investment, inefficient use of capital and ultimately result in lowering the growth rate of the nation. Numerous studies has been conducted and it has been found conclusively that institutional factors like Rule if Law, personal liberty, absence of corruption, efficient administration propels the growth rate of any nation.
Thus on theoretical, moral and economic ground- there is a case for efficient and honest tax administration. We will not require any independent proof that our tax administration is neither efficient nor honest. This paper is an attempt to examine the possibility of private sector participation in the tax administration so as to make is efficient and honest- and more so to inculcate the spirit that tax administration exist for the people.
PRIVATE COLLECTION OF TAXES:
Under Article 265 of the Constitution of India, the taxes are to be levied as per expressed provision of law. However, the machinery of tax collection is based on convenience- there is no bar that private persons cannot collect taxes. On smaller taxes, like toll tax imposed by Municipality, at various places it is collected by private parties. Excise duty on country liquor is collected by private parties. In approximately 80 countries of the world, custom duty is privately collected. Thus it is perfectly legal if tax collection is privatized. However, for the purposes of this paper, the author is confining itself to certain processes which can be easily privatized, without unduly affecting the present tax structure.
Receipt of Communication:
A tax payer is required to give certain communication to the department like application of registration, periodical returns, intimations, reply to departmental communications etc. Any person who visits the departmental office has a horrowing experience in getting a receipt of the communication. Citizen’s Charter says that communications shall be acknowledged on the spot. However, every assessee knows that how difficult is to get a receipt of communication. I feel that certain private agencies, like post office, or banks or even private companies can be authorized to receive such communication on behalf of the department. Thus the department will be saved of many visitors in the office, the assessee will be saved from undue harassment, interface of tax payer and taxmen will be reduced leading to reduced corruption, more accountability of the department etc. Further, the scheme can be self financing as a user fee can be imposed, like Rs. 50 per communication.
Another problem is with E-Mail communication. The supplementary instruction of the department says that communication can be sent via E-Mail. However, the departmental officers never reply to the mail. Whether, they reply or not, it is there problem. The assessee must get an acknowledgement of the sent mail. The official mail boxes of the officers can be given a facility of auto reply of acknowledgment.
Registration of unit is a first point where an assessee meets the department, and this meeting ordinarily not very pleasant. As per the departmental instructions, the registration certificate is required to be issued immediately and verification is done after registration. There are well defined documents which are required at the time of registration. This process may be privatized, and private persons can be empowered to issue registration certificate. After such registration, the department can do the verification and if any anomaly is found, appropriate action can be taken.
Thus we can examine various processes, which are simple and does not have revenue amplifications which can easily be privatized. Even other processes like dispute settlement, adjudication, audit etc. can also be privatized without much difficulty, but examination of those processes are beyond the purview of this paper. A beginning can be made with simple processes. If the government of the day is really a government of common man, and interested in transparent governance it will certainly take some positive steps in the direction.
Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on [email protected] , Web: www.rajeshkumar.co.in