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Chidambaram Praises Increase In Voluntary Tax Compliance

by Lorys Charalambous,, Cyprus

17 June 2008

Speaking last week at the 24th Annual Conference of Chief Commissioners and Directors General of Income Tax held in New Delhi, Indian Finance Minister, P. Chidambaram congratulated the Income Tax department on direct tax collection of INR3.14tn.

Continuing his inaugural address, the Finance Minister went on to suggest that the phenomenal growth in tax collection was one of the significant achievements of the present Union Government.

Exhorting top tax officials to further enhance tax collection efforts, Chidambaram observed that as the average growth in direct tax collection had varied in the past four years between 25% and 39%, it was within reach to achieve tax growth of at least 25% during the current fiscal, over and above the net collection last fiscal.

The Finance Minister pointed out that the level of voluntary tax compliance had gone up in the country, as indicated by substantial growth in collections from tax deducted at source at 51%, advance tax at 33.6%, and self-assessment tax at 62% during fiscal 2007-08 over the previous fiscal year, while the post-assessment tax collection had declined by about 5%, "as it should be in a maturing tax system".

He observed however that the quality of tax scrutiny could further improve if tax authorities agree to place more trust in taxpayers, and don't view every case generated by the computer aided scrutiny selection with suspicion.

The Finance Minister further observed that trend of voluntary tax compliance was also indicated in the large proportion of electronic tax returns filed voluntarily out of total e-returns filed, which had increased significantly from about 323,000 during 2006-07 to over 2.19mn during 2007-08.

He revealed that the use of digital signatures in e-returns had also significantly increased, while e-payment of taxes was increasing, and is expected to further increase, as it has been made mandatory for certain categories of taxpayers to pay taxes electronically.

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