Advocate M Sudhakar

If we analyze, we will understand that, it is the tendency of the people to save tax, they do the tax planning. If the Tax rates are too high, tax planning and ways and means to save tax will emerge. In the bargain there will be greedy to retain hard earned money. When there is no alternative, then there is willingness to pay taxes.  In addition to the high rate of taxes, tax compliance is also cumbersome with complicated and tricky procedures. ( for example same Income Tax Law which is common for all the Citizens, Tax authorities will interpret differently, industry will understand differently and the Judiciary will understand yet another way).

Why there can not be simplified and easy to understand procedures and law.

If the rate of return on the capital invested in business in India, is assumed, say between 10 to 12% among the SMEs and small traders. And the direct taxes on their income would be 33%.  For the risk and adventure in the business, SMEs gets a return of around 12% and the tax rate is double than his return.

So the tendency to evade tax or avoid taxes.

Another persistent problem faced by the industry, SMEs and business community is tax compliance. Why the tax system is not simple and easy to follow?. Can the Government make simple the tax compliance and tax return filing system which an ordinary business man can compute and pay taxes. How many individual business men or SMEs or Industry houses are computing and filing the tax returns on their own, without the help of Consultants and tax practitioners. ( Consulting community may not like this, but their special services are always required in fighting litigation). The system of computing tax must be so easier, like how the business man or trader computes his VAT in his Invoice/bill.

Worst part is, the SMEs and small business traders always faces cash flow problems and  run short of Cash most of the times, even to pay the salaries for staff. It is night mare when it comes to the vendor payments and other statutory payments.

Over and above these, there are fines and penalties and interest for late payment, non- payment. Above all, one should face the Tax Officials for scrutiny, assessment, inspection, audit etc.

Where is the motivation for the people?

If the Tax rates are low, the whole nation will support and will be proud to be a tax payer without any special collection drive by Government and Tax Departments.

  1. If the transparency is there in the system, and businessmen can pay the taxes collected and forget about the scrutiny, assessment, maintenance of records, threats by bureaucrats.
  2. Statutory compliance is another nightmare for the business community, they have to deal with the field officers who interpret the statute in their own way.
  3. If any one gets statistics on cases pending with Tax Tribunals, especially on indirect taxes, will come to know the litigation.
  4. The litigation is very expensive, and it is not affordable to SMEs and small business traders, hence the tendency to avoid tax compliance and litigation. The Government has to seriously think about this swift from Inspection Raj to facilitation mode, where all the citizens of India abide by the statute and comply voluntarily.

Government should come up with the proposal to withhold the tax / recover the taxes from the transaction level. There should not be filing, payment, and return system. The tax payment to trigger at transaction level and should be automatic recovery through Bank, Treasury  or any other agency or any other mode.

Any simpler ways to collect taxes…………….

Black money generation, where is it happening and whys is it happening? The tax burden, tax compliance, litigation. If these things are put it into shape, there is no black money, no evasion of taxes, no corruption.

Let the Income Tax rates be at lowered.

Ease the collection mechanism.

Ease the return filing and record maintenance.

Ease the compliance.

Let the responsibility be with the Citizens. Let the transparency be there at every stage.

If a small section of the population ( profit making industries) is being taxed at say 33%, why not, the whole nation be taxed at 1 or 2% and earn more revenue with less burden.

(Author can be reached at

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February 2024