The Tax Information Network
Reforms in Tax administration are exhibiting the first signs of positive results. Collections have risen sharply in the first few months of this financial year. This was contrary to the expectations that the projections on revenue collection were over-optimistic. Reducing the scope for tax evasion is just one part of tax administration and it has already resulted in a 50 percent increase in collections. The reforms involved the setting up of a pan – Indian online system for information about tax deduction at source.
The Tax Information Network (TIN) involves the computerization of tax deduction at source, permitting cross-checking of ‘faxes deposited at banks with the tax statement of the assessee. Earlier no cross-checking was done to see if an employer had actually deposited taxes as claimed paper forms have been replaced by online information at TIN facilitation centers. TIN rules out fake statements by employers and fake certificates by employees reducing the scope for corruption. It also reduces compliance costs of the tax payers who will no longer have to obtain TDS certificates. Information will be available with the tax authorities against the tax payer’s PAN number. TIN reduces the cost of compliance for both employer and government.
Today INDIA has a huge advantage in the capacity and low costs of building nationwide IT systems. In the last few years, this had been undertaken with great success in railways, equity markets, and, more recently, in commodity markets. This advantage allows the quiet implementation of large scale complex systems. For example, it was decided to build the TIN as late as July ’03. By January ’04, the system was up and running. In other countries, systems of this scale and scope take much longer to build and are more expensive. India should effectively harness its IT advantage to the maximum. Further, because the VPA may remain bogged down on the bigger reforms due to political considerations, there is even more reason for the government to actively continue with such ground-level reforms. Looking at the success of the TIN, the Finance Ministry should embark on full automation of all tax processes as soon as possible. All collection and administration must be brought under modern IT based systems which operate with rules and remove the scope for discretion, corruption, and harassment at the hands of income tax officials.