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July 13 To July 19, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 54- For use of technology in tax administra-
tion, the survey said it has decreased
manual intervention and improved the
experience of a large majority of tax-
payers. - To improve the collection of tax revenue,
the Survey suggested use of psychological
tactics to push people towards saving more,
opting for health insurance and similar
desirable personal finance behaviour. The
Economic Survey is also in favour of
using religious norms such as ‘dying in
debt is a sin’ to improve tax compliance. - The Economic Survey suggested ration-
alization of tax policy for startups to
encourage ‘innovative investments’ in
the Indian economy, as it acknowledged
their role in driving economic growth
and creating jobs. The Survey recognized
that startups and innovative ventures
face significantly greater uncertainty than
traditional brick-and-mortar firms. Any
policy ambiguities that create collateral
damage for genuine risk-takers can affect
investments. - The survey said that research across coun-
tries has highlighted that tax evasion is
driven significantly by tax morale, which
is driven primarily with the thought
that what one paying taxes should com-
mensurate to the benefits he receives as
services from the government. - Citizens perceive unfairness, if they find
that their tax payments being squan-
dered in wasteful public expenditure or
by corruption. Similarly, perceptions of
injustice arises when employee class is
forced to contribute disproportionately to
income taxes while the class of self-em-
ployed gets away paying minimal taxes.
Both perceptions contribute to high tax
evasion in a country, the Survey said.- The survey has suggested various innovative
ways to improve the tax compliance. It
suggested to highlight and recognize top
10 highest taxpayers within a district.
This may take the form of expedited
boarding privileges at airports, fast-lane
privileges on roads and toll booths, special
‘diplomatic’ type lanes at immigration
counters, etc. - The highest taxpayers over a decade
should be recognised by naming im-
portant buildings, monuments, roads,
trains, initiatives, schools and universities,
hospitals and airports in their name, the
Survey suggested. - The Survey advised to apply behavioural
principles to enhance tax compliance. It
suggested that tax withholding followed
by refunds at the time of tax filing may
increase tax compliance and total taxes
paid. Taxpayers are more concerned
about tax deduction claims when they
owe additional tax (loss) at the time of
filing than when they expect a refund
(gain). - Providing information about peer behaviour
can make taxpayers adjust their reported
income. Messages in the form of moral
appeals to taxpayers regarding payment
of taxes may have limited effects. - The Economic Survey counseled against
tax amnesties as it reduces tax compli-
ance if taxpayers perceive amnesties as
unfair. Amnesties can decrease the gov-
ernment’s credibility and the taxpayers’
intrinsic motivation to comply by setting
the incorrect social norm.
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TAX FACTS AND SUGGESTIONS IN ‘ECONOMIC SURVEY’