TAX PAYER’S CHARTER

WHY IN NEWS:

• Prime Minister launched a ‘Transparent Taxation - Honouring the Honest’ platform on August 13, 2020 that provides faceless assessment and faceless appeal and a taxpayers’ charter.

ABOUT TRANSPARENT TAXATION PLATFORM:

• It is aimed at bringing transparency in income tax systems and empowering taxpayers
• Three main features of the platform are:
• 1.Faceless Assessment:
  • It aims to eliminate human interface between the taxpayer and the income tax department.
  • There will be no need for the taxpayer to visit the income tax office or the officer.
  • The selection of a taxpayer is possible through systems using analytics and Artificial Intelligence.
• 2.Faceless Appeal:
  • Under the system, appeals will be randomly allotted to any officer in the country. The identity of the officer deciding the appeal will remain unknown.
• 3.Taxpayer Charter:
  • This outlines the rights and responsibilities of both tax officers and taxpayers.

EVOLUTION OF TAX PAYER’S CHARTER:

• Tax payer’s charter was propounded in 2019 National Economic Survey
• Budget of 2020 proposed to amend the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter

NEED FOR TAX PAYER’S CHARTER:

• To build trust:
  • Any tax system requires trust between taxpayers and the administration
  • This will be possible only when taxpayer’s rights are clearly enumerated.
• To enhance efficiency of tax system:
  • Transparency in tax administration will increase compliance and hence paves way for increased efficiency in the system
• Effective use of nudge philosophy:
  • Through taxpayer’s charter, the government is efficiently and effectively using the “nudge” philosophy in public policy to motivate the population towards the desired objective
• To reduce corruption:
  • Empowering tax payers or citizens with the information regarding the commitments of tax authorities will helps in reducing information asymmetry and hence aids in checking corruption in the tax department.

ABOUT THE TAX PAYER’S CHARTER

• The taxpayer’s charter lists out the income tax department's commitments to the income taxpayer as well as what the department expects from the taxpayers.

TAX OFFICERS IS COMMITTED TO 14-POINT CHARTER:

• To provide fair, courteous and reasonable treatment:
  • The tax department will provide prompt, courteous and professional assistance in dealings with the taxpayer.
• Treat taxpayer as honest:
  • The income tax department shall treat every taxpayer as honest unless there is a reason to believe otherwise.
• To provide mechanism for appeal and review:
  • The tax department shall provide fair and impartial appeal and review mechanism.
• To provide complete and accurate information:
  • The department shall provide accurate information for fulfilling compliance obligations under the law.
• To provide timely decision:
  • The department shall take decision in every income-tax proceeding within the time prescribed under the law.
• To collect the correct amount of tax:
  • The department shall collect only the amount due as per the law
• To respect privacy of taxpayers:
  • The department will follow the due process of law and be no more intrusive than necessary in any inquiry, examination or enforcement action.
• To maintain confidentiality:
  • The department shall not disclose any information provided by the taxpayer to the department unless authorized by law.
• To hold its authorities accountable:
  • The department shall hold its authorities accountable for their actions.
• To enable representative of choice:
  • The department shall allow every taxpayer to choose an authorized representative of his choice.
• To provide mechanism to lodge complaint:
  • The department shall provide mechanism for lodging a complaint and prompt disposal thereof.
• To provide a fair & just system:
  • It shall provide a fair and impartial system and resolve the tax issues in a time-bound manner.
• To publish service standards & report periodically:
  • The department shall publish standards for service delivery in a periodic manner.
• To reduce cost of compliance:
  • The department shall duly take into account the cost of compliance when administering tax litigation.

TAXPAYERS ARE RESPONSIBLE TO FULFILL 6-POINT EXPECTATIONS:

• Be honest and compliance:
  • Taxpayer is expected to honestly disclose full information and fulfil his compliance obligations
• Be informed:
  • Taxpayer is expected to be aware of his compliance obligations under tax law and seek help of department if needed
• Keep accurate records:
  • Taxpayer is expected to keep accurate records required as per law
• Know what the representative does on his behalf:
  • Taxpayer is expected to know what information and submissions are made by his authorized representative
• Respond in time:
  • Taxpayer is expected to make submissions as per tax law in timely manner
• Pay in time:
  • Taxpayer is expected to pay amount due as per law in a timely manner

BENEFITS

• Change in perception:
  • Introduction of an exclusive charter changes the perception of both the taxpayers and officials from taxpayers being scrutinised as offenders to being viewed as an equal stakeholder
• Encourage voluntary compliance:
  • A defined framework on the rights and duties of taxpayer’s would increase the predictability in the tax system, and hence improves voluntary compliance
• Avoid unnecessary litigation:
  • Quality and clarity in communication between taxpayers and tax authorities will avoid any misunderstanding and unnecessary litigation
• Expeditious disposal of cases:
  • Taxpayer’s charter will pressurise bureaucrats to take timely decisions and resolve the tax issues in a time-bound manner
• Improvement in quality of assessment:
  • Informed tax payer can better keep their records and hence produce accurate tax assessment
• Helps to maintain confidentiality:
  • It helps to maintain the privacy and confidentiality of income taxpayers

WHAT IS CITIZEN’S CHARTER?

• The Citizen’s Charter is a voluntary and written document that spells out the service provider’s efforts taken to focus on their commitment towards fulfilling the needs of the citizens/customers.
• In India, the concept of citizen’s charter was first adopted at a ‘Conference of Chief Ministers of various States and Union Territories’ held in 1997
• A major outcome of the conference was a decision to formulate Citizen’s Charters by the central and state governments, beginning with sectors with a large public interface such as the railways, telecom, posts etc
• The charters were mandated to include service standards, the time limit that the people can expect to be served, mechanisms for redressing grievances and a provision for unbiased scrutiny by consumer/citizen groups.
• The task of coordination, formulation and operationalisation of citizen’s charters are done by the Department of Administrative Reforms and Public Grievances (DARPG)
• The DARPG website lists more than 700 charters adopted by various government agencies across India
• The Indian model of citizen’s charter is an adaptation from the UK model.
• Citizen’s charters are not legally enforceable documents. They are just guidelines to enhance service delivery to citizens.

CITIZEN’S CHARTER VERSUS TAX PAYER’S CHARTER:

• A Citizens' Charter of the Income Tax department is not enforceable by law, while the Taxpayers’ Charter has been enshrined in the statute of the Income Tax Act.
• Citizen’s Charter has specific timelines for providing service to taxpayer. But the Taxpayers' Charter does not mention that and is quite vague

INTERNATIONAL EXPERIENCE:

• There are only three countries in the world that have enshrined the rights of the taxpayers - Canada, the US, and Australia.
• India will be the fourth country to implement it as a statute.

PRACTICE QUESTION:

Q. What is Taxpayer’s Charter? Discuss its role in improving tax compliance in India?