A succinct and riveting story about ‘Taxation’

A succinct and riveting story about ‘Taxation’

- By A Tax Professional

There is no doubt that today ‘Tax’ is the buzzword. It is aptly said by an American scholar that ‘the democracy will cease to exist when you take away from those who are willing to work and give to those who would not’. So in a country like India, there has to be a crucial balance between rights of the Citizens vis-à-vis the responsibility of its Government to devise policies and plans regarding Taxation.

The word ‘Tax’ comes from a Latin word ‘Taxo’, which means ‘estimate’. A tax is a compulsory fee or financial charge levied by a government on an individual or an organisation to raise revenue for public works. It is ‘Income Tax’ which impacts the pockets of the common salaried class the most.

Have you ever imagined when the first ever income tax was levied in the history of Indian Taxation? The history of Income-Tax in modern India dates back to 1860 when the first Income Tax Act was introduced by James Wilson who became (British) India’s first finance member. This Act lapsed in 1865.

Much later, i.e. in 1922, major changes were done in the Income Tax Act. Even after amendments there were merely 68 sections in the Act. Since then many revolutions came and gradual changes were made in the provisions of the Income Tax Act. These amendments though rational and just, they were not assimilable to the common man. That is why every time there was any change, it had to face a barrage of criticism from them.

Even Albert Einstein, the profound scientist, found taxes inscrutable. He once said, “The hardest thing in the world to understand is the Income Tax”. As a result of these constant amendments, today the Income Tax Act, 1961 has approx. 300 Sections, which is undoubtedly the reason for calling it as a weighty tome.

Let’s take note of an interesting trivia revolving around Taxes across the globe. There are few countries which impose some bizarre taxes:-

Switzerland – where tax is levied on Pet dogs

Ireland – where tax is imposed on the methane gas coming out from the fart of cow

Arizona U.S – where tax is levied on purchase of ice blocks

Even India because of varying culture and influences, in it’s various States including Punjab, Chandigarh and Rajasthan, imposed cow welfare cess. Very recently in Madhya Pradesh, state administration has made it mandatory for those applying for arms licence to donate 10 blankets to cows or serve for three days in a ‘gaushala’ (cow shelter).

Coming to complex tax structure and frequent amendments in the provisions of the Act, which has someway caused mental pressure to the common citizens as they have to face undue harassment from certain dishonest taxmen during their assessment proceedings. Thus, it is the high time when the department must have taken it seriously to change their image in the eyes of the honest taxpayer of the country.

If we talk about of future of Income Tax in India, first thing which comes to mind is the recent Taxation Laws (Amendment) Bill, 2019, which proposes lower rate of taxation for the new domestic manufacturing companies with an option to pay tax @ 15%, which were established after October 1, 2019 and started operations before March 31, 2023. The companies opting for lower tax rates will, however, not be entitled to claim any rebate or deductions.

E-assessments through faceless mode, which has already been started for large tax payers as a pilot project is also paving the way forward for smooth inculcation of technology for simplification of procedural aspects of taxation.

Also as per the Income tax department’s project “Insight”, watch of social media uploads of vacation, purchase details of heavy price items, costly tickets of concerts acts as a catalysts to do evaluation of escaped income.

Many countries across the globe like Japan, Philippines, South Korea give various incentives to their compliant taxpayers. Even Pakistan has a scheme to reward the top 100 taxpayers every year with access to VIP lounges at airports, fast-track clearance at immigration counters, free passports and enhanced baggage allowance.

Indian Government has also initiated a practise to distribute Bronze, Silver and Gold Category Certificates to various compliant taxpayers which CBDT terms as the first effort by the government to directly communicate to the tax payer as appreciation for their contribution. Given the negative image of the Income Tax Department caused due to generation of tax demand notices and rigorous assessment proceedings every year, a positive communication, was much needed. Any future scheme of the department to cut down on disputes and litigation on taxation, and to acknowledge / reward tax payers will be a welcome move and this is what the theme of the TIOL Annual National Taxation Awards – to reward the tax paying behaviour of a common man.