The 10-member committee set up by the government to simplify and identify, among other things, phrases in the income-tax laws that lead to unnecessary litigation because of different interpretations is a very good move.
The committee headed by former Delhi High Court judge R.V. Easwar will inspire a lot of confidence as he was one of the best tax tribunal judges. As he said in an interview, they will first try to simplify the tax laws for individual taxpayers who have to depend on expensive chartered accountants to file their returns. It is interesting that on the same day that the government announced the committee, the World Bank came out with its ease-of-doing-business report in which India’s ranking worsened from 156th to 157th in making it easier to pay taxes.
Whilst the government has undertaken many reforms, especially in retrospective taxes and minimum alternate tax (MAT), there is, for instance, no clarity on whether SEZs have to pay MAT. There is a lot that needs to be done on issues like transfer pricing and tax deductions. One tax expert, for instance, described the chapter on capital gains as a complete patchwork.
The committee, which has to give its initial report by January 30 so that there is time for discussion and inclusion of some recommendations in the Union Budget. The agenda for the committee is quite pervasive but one hopes that somewhere the committee will include accountability for tax officials. Today they are a law unto themselves; unless there is accountability, the reforms recommended could be derailed at the implementation level.
