Direct tax deficit to be offset by rise in customs duty collection: Parthasarathi Shome

The impending shortfall in direct tax collections could be partly offset by a likely increase in customs duty collection, spurred by a depreciation in rupee, said Parthasarathi Shome, advisor to the Union finance minister, who ruled out any plans by the government to consider a tax amnesty scheme. He said that such amnesty schemes do not improve behaviour of tax evaders and is unfair to honest tax payers.

With the rupee depreciation, imports become costlier in rupee terms; hence the expectation of a rise in customs duty collection, Shome said. The amnesty scheme now underway for service tax will also bring in additional revenue, he added.

Finance minister Chidambaram's target of limiting the fiscal deficit at the projected level of 4.8% of GDP will be achieved, Shome asserted.

He said the objective behind setting up of Tax Administration Reforms Commission (TARC), of which he is the chairman, is to undertake major changes in the current tax administration structure and practices.

For example, a huge amount of data are collected by the income tax and excise, customs and service tax authorities. The tax administration should be able to set up a machinery to analyse the data and use these effectively to improve tax administration and shape tax administration policy. But the system is not equipped enough at present to make full use of the data being collected. It will be addressed by TARC, he said.

He emphasised that computerisation is a major factor in streamlining and modernising tax administration. The use of computers should be spread to more areas of electronic filing and more segments of taxpayers as well as for better exchange of information among departments.

Exchange of information among tax departments and the intelligence and enforcement arms of the finance ministry could help match data, identify tax evaders and enforce compliance.

At the same time it was equally important to minimise the cost of voluntary compliance for taxpayers so that honest taxpayers can pay tax with ease and confidence.

The committee will also make recommendation to strengthen the mechanisms for dispute resolution between assessees and the tax departments. This will cover both domestic and international taxation issues since the latter has come to centrestage in the present environment of international capital movements.

Shome said that as chairman of the independent committee on the taxation of indirect transfers of assets located in India, he maintains the views expressed in the report. However, he declined to comment on the Vodafone tax matter, as he thought it inappropriate to comment on a single assessee's tax issues.