Batting for lower tax rates, Wipro Chairman Azim Premji argued on Tuesday that such a reform would encourage people to be honest taxpayers. “It increases voluntary compliance. Resistance to pay taxes arises due to perceived lack of clarity, and improving transparency and accountability in public spending by the government will enhance people's awareness of their role in nation building,” Premji noted.
The Wipro chairman, who was delivering the keynote address at the 158th Income Tax Day celebrations hailed the Centre's focus on widening the tax base.
“The tax:GDP ratio in India is 16 per cent compared with the developed countries where it is 35-40 per cent. It is imperative that India's tax:GDP ratio climbs substantially to meet the growing needs of social and public investments. The tax revenue in the Union budget constitutes 80-82 per cent of total receipts and the social sector, infrastructure and defence spend is met by the taxes. Given such high reliance on taxes, it is only natural the taxpayers play a very important role in nation building. The taxes we contribute go into investments in indigenous projects like Chandrayaan (Moon mission),” said Premji.
Reiterating that expansion of the tax base was a better option than higher tax rates and enforcement measures, Premiji said, “Vigilance and investigation have yielded moderate results. The lower the rate of taxes, lower the incentive to evade [paying] tax. Recent initiatives like reduction in corporate tax rates for small and medium enterprises and rationalisation of slab rate for individuals are commendable. While there is more to be done, the policy and thought process is in the right direction.”
Citing the recent economic survey, the Wipro chairman pointed out that total pendency of tax cases was approximately Rs. 7.6 lakh crore (almost 5 per cent of GDP). “The success rate of appeals filed by the Income Tax department at higher appellate forums is less than 30 per cent. This calls for a serious qualification process for issues litigated at higher levels,” felt Premji.
“Ease of compliance and technology adoption have played a key role in compliance The online assessment process and reduction of face time with the officers for routine activities are a welcome step. We must integrate downstream activities of dispute resolution and appellate procedures. Empowerment at the department level to settle disputes amicably is crucial.”
“While we have one of the lowest tax administration costs, we must enhance revenue productivity by directing that cost to widen the tax base rather than applying it in wasteful and repetitive litigation,” said Premji, who also suggested that there was a good prospect of using GST data to validate the income tax returns.
Chief Commissioner for Income Tax (Karnataka and Goa region) B.R. Balakrishnan said, "The region stands third in the country and had exceeded the Rs. 1 lakh crore mark in tax collection. Tax compliance is encouraging in Karnataka. We have set a target of Rs. 1.23 lakh crore for the current financial year. We have unearthed unaccounted cash worth Rs. 12,000 crore from tax evaders."
Earlier in the day, the Wipro chairman, who called on Chief Minister H.D. Kumaraswamy, extended technological support from Wipro to help the Karnataka government fight air pollution and agreed to be a partner to implement “zero-budget farming”. He also urged Kumaraswamy to appoint a nodal officer for such initiatives.