The Telegraph
Thursday , March 27 , 2014
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Tax wing merger

Parthasarathi Shome in New Delhi on Wednesday. Picture by Prem Singh

New Delhi, March 26 (PTI): The Tax Administration Reform Commission (TARC), set up by the finance ministry to suggest measures to prevent economic offences among other things, will soon look into the amalgamation of direct tax and indirect tax departments.

“In business practices, companies pay corporate income tax, companies also pay value-added-tax (VAT) or GST. If we amalgamate direct tax and indirect tax departments, it would be so much easier for companies to file returns and so on. We in commission (TARC) are going to look into the issue,” TARC chairman and adviser to finance minister Parthasarathi Shome today said at an event organised by Assocham.

Citing a survey by Paris-based think-tank OECD, Shome added, “Among 60 per cent of countries that were surveyed by the OECD, a vast majority of countries have already amalgamated the two departments (direct tax and indirect tax departments).”

He said the Commission is also looking into the issue — whether the judicial powers given to the assessing officer should be reviewed.

“We are discussing whether it is an optimal level (AO),” Shome said.

The TARC, mandated with the job of reforming the entire gamut of tax administration, is likely to submit its first report by May-end.

The TARC was given the tenure of 18 months to give its final report which will go to the next government for follow-up action.

Shome also said tax rates should not be too progressive because that would kill the incentive to save and invest.

However, he asserted that the personal tax rates in India, measured in purchasing power parity, are among the lowest in the world.

Shome also said policy direction has been towards bringing more number of people within the tax net which is about 3.6 crore at present. “We can go up to 5 crore that will enable tax rationalisation and tax rate can also come down,” he said.