Go to the Customs warehouse at Mumbai and you find officials joke about how your files may have been held up because the person in charge probably wants more money for clearing goods.
The property registration office in Bandra, has officials working with an open drawer, in which you have to deposit a Rs 500, if you want your registered documents back in a reasonable time.
Octroi officials around the country habitually deprive the exchequer of a few thousand crore rupees with their annual ‘hafta’ arrangements to allow busloads of goods to cross State borders without paying Octroi. So entrenched in their system that entire municipal corporations go on strike at the mention of scrapping Octroi collections and State governments allow itself to be held to ransom and prefer to fleece ordinary citizens by hiking parking and toll charges to meet expenses.
Yet, these examples do not even figure among the 10 sectors, which, according to a corruption perception survey by Transparency International gobble up a whopping Rs 26,728 crore in bribes and speed money from Indians every year. We are told that the amount is just 10 per cent of the total compensation of Rs 235,496 crore paid to public sector employees in a year. Put that way, it almost sounds like the 10 per cent service charge that is normally added on to your bill by good hotels and restaurants. But as Transparency International itself has clarified, statistics can be misleading. The sectors that it surveyed were —education, health, police (law and order), power, telephone (communications), railways (transport), land and building administration, judiciary, taxation and ration (public distribution system). And education and health emerged as the most corrupt sectors, mainly because most people surveyed were usually compelled to use these services.
Plenty of other sectors cause far more damage to the economy, because discretionary powers, lack of transparency and stifling red tape give government officials enormous powers to persecute and harass people. Even a rough survey among business people (not salaried employees) would reveal that the Income Tax, Customs and Excise officials are among the most corrupt. The low level of tax collection and compliance and frequent amnesty schemes over the years only prove that the system has always favoured tax evaders and discouraged tax payment. If lack of transparency is the problem, then automation and computerisation are clearly the answer. But many government departments have successfully resisted and delayed effective automation so that large chunks of business could continue to operate in a non-transparent manner. It is common sense that unless the tax machinery routinely reconciles payment claims made by one set of assesses with actual receipt of money by others, it cannot accurately assess tax liability.
The absence of such systems gives officials the discretion to allow or disallow claims and the power to collect bribes. In this respect, the Vijay Kelkar Committee reports on direct and indirect taxes have made an admirable effort to force the Income-Tax department to become more transparent. The Kelkar report argues that ‘the tax department should be allowed to concentrate on its core functions’ which are ‘assessment and enforcement’ rather than ‘logistics and support services’. Dr Kelkar has made a case for establishing a Tax Information Network (TIN) in a trouble-free and cost-effective manner by simply outsourcing work to the National Share Depository Ltd (NSDL) on a build, own and transfer basis. The NSDL already holds nearly 40 lakh investor accounts and efficiently manages the transfer and registration of several thousand crore rupees of transactions everyday through a fully automated system. Moreover, it has the experience and the ability to take on the task of creating the TIN. While the I-T department hasn’t managed to allot mistake-free Permanent Account Numbers (PAN) to India’s tiny population of taxpayers, the Kelkar panel wants the entire TIN to be up and ready in four months. The good news is that Vijay Kelkar’s targets are completely achievable. For starters, NSDL will develop a system of processing returns and reducing transaction modelled on the securities market. It will be a repository of information and a database of tax-refunds and payments. The Kelkar Committee envisages that the TIN will receive all information on Tax Deduction at Source (TDS) for digitisation on behalf of the tax administration. This in turn will be downloaded by the National Computer Centre (NCC) of the I-T department for further processing.
Informed sources say that the information verification machinery of the department is so poor, that it has no way of even verifying if the TDS certificates issued by companies for various services are genuine. There is even a suspicion of fraud involved in the issue of TDS certificates.
Since all TDS certificates will carry PAN numbers, the NSDL system can facilitate cross-verification. NSDL would collate TDS information, sort it out and deliver it to the exact I-T circle at which each assessee files his/her returns, it would eliminate the need for taxpayers to collect TDS certificates. The claims made by them would be available with the tax department for cross verification of payment claims. If PAN numbers are similarly used as unique client identity numbers on stock market transactions, it would eliminate a great deal of black money from the capital market.
Similarly, refund information will be downloaded on a daily basis to enable designated branches to make electronic refund payments as they do with dividends. This itself will eliminate a big source of grease-money collected by refund clerks in the I-T department. In fact, taxpayers will be able to access the TIN system through confidential PAN-based identification to ascertain the status of returns and refunds. Significantly, Kelkar’s recommendations to improve transparency have already begun to be implemented. And the Finance Ministry has already ordered the outsourcing of allotment of PAN cards, calculation of tax and issue of refunds to 2.5 crore assessees in the country to UTI Investor Services. Hopefully, the hullabaloo over the Kelkar Committee’s direct tax recommendations will not kill its excellent suggestions to improve the transparency and efficiency of one of India’s most notorious government departments. And that the successful implementation of these recommendations, will force the government to work on a similar system to tackle the collection of customs duty, sales tax, excise, octroi collection and property records and transfers. A proper collection of these taxes alone will probably work wonders on the state of our fiscal deficit and lower the incidence of bribes paid out by business and industry.
-- Sucheta Dalal