Indian tax officials support proposals to address tax dispute backlog

Indian tax officials support several recommendations designed to reduce the large number of tax disputes in the Indian court system proposed by the Tax Administration and Reform Commission (TARC), according to a TARC report released February 20.

The report, entitled “Recommendations, Feedback & Way Forward,” accompanies the release of the TARC’s fourth and final report, putting into one document hundreds of recommendations made in four TARC reports on how to improve India’s tax administration system.

The report also describes tax official and field officer reactions to the proposals, gathered from a series of town hall-style meetings, and lists recommended top priorities to improve tax administration. The tax system India requires a “total transformation,” the report states.

The feedback report states that a TARC recommendation that calls for the establishment of a task force to assist in disposing within one year all tax disputes that have been pending over one year “was widely accepted both at the apex level as well as at the field level of the departments.”

Tax officials from both the Central Board of Excise and Customs (CBEC) and Central Board of Direct Taxes (CBDT) approved of the plan, and agreed that urgent action must be taken to reduce the number of unresolved tax disputes, the report said.

The report  also stated that both CBEC and CBDT personnel supported a TARC recommendation that tax departments regularly issue clear interpretative statements on contentious tax issues that would be binding on the tax departments.

The tax departments also agreed with the suggestion that the government withdraw appeals of pending cases when the government has lost a case in the in Supreme Court or High Court and the dispute in the pending case involves the same issue.

Reaction was mixed to a TARC recommendation to adopt rules providing that if tax disputes were not resolved within a set time frame, the law should prescribe consequences that would run in favor of the taxpayer. Income tax officers agreed to the recommendation on the condition that the timelines were achievable, but both CBEC and CBDT officials were more cautious, stating that delays in resolving tax disputes are not only the fault of the tax departments.

The TARC also received a mixed government reaction to its recommendation to set up a large taxpayer service which would be operated jointly by the two boards to provide more unified taxpayer services, compliance verification, dispute management, and recovery and tax debt collection. Some were open to the idea, but worried that the plan would not be successfully implemented.

The report said that improvements to dispute resolution should be a top government priority, along with improved customer service, and movement toward the eventual merger the CBEC and CBDT. The two tax departments should immediately begin to jointly undertake policy analysis and should set up and jointly run a large taxpayer service, the report said.

The report was released with the TARC’s fourth report, entitled “Tax Administration Reform in India Spirit, Purpose and Empowerment” which covers issues such as revenue forecasting, predictive analysis, and research for tax governance.