Look beyond calls for tax leeway, FM tells industry

The minister appealed to tax professionals and institutions to not limit themselves to the sectors they represent and help bring independent tax policy research to become part of the public discourse.

New Delhi: Finance minister Nirmala Sitharaman on Wednesday urged industry and tax professionals to go beyond demands for lower taxes or higher exemptions and incentives, and instead bring evidence-backed ideas to improve the tax system, along with an assessment of any unintended consequences their proposals could have.

Speaking at a global tax conference in Bengaluru, Sitharaman also flagged the “continuous negative commentary" on growth as “worrying” and asserted that the economy is on a strong footing despite elevated external headwinds.

“India is navigating these waters amid global challenges in such a way that our people do not suffer, and we are far better placed than others,” the minister said in a question-and-answer session that followed her speech at the event organized by the International Tax Research and Analysis Foundation.

The minister appealed to tax professionals and institutions to not limit themselves to the sectors they represent and help bring independent tax policy research to become part of the public discourse.

“I don’t question the sincerity of these (pre-Budget) representations and submissions. Each sector naturally argues from the standpoint it represents. But a mature tax policy debate must go beyond sectoral consideration,” Sitharaman said. “I wish to hear a submission that says: here is a provision that no longer serves the tax system and ought to be removed even though we presently benefit from it, and (another provision) would be better than this one.”

The proposals must also specify the compliance requirements they may call for, the potential beneficiaries and the consequence of any such changes on the broader tax base, said the minister, urging professionals to contribute to a consultation process that puts the nation’s interest first.

The government, Sitharaman said, has aimed at “reducing tax litigation rather than merely managing it”. The focus has been to make voluntary compliance easier and reserve enforcement capacity for cases that genuinely require it, she added.

The Vivad Se Vishwas scheme, she said, provided taxpayers and the government an opportunity to settle old disputes instead of being embroiled in endless litigation.

The thresholds for departmental appeals have also been raised to ₹60 lakh before the Income Tax Appellate Tribunal, ₹2 crore before high courts and to ₹5 crore before the Supreme Court. These are among a raft of measures cited by the minister as efforts to reduce tax litigation.

Taxation in digital

In response to a question, Sitharaman underscored the “enormity” of taxing the digital economy, as it spans geographies.

She said digital companies, transactions, consumption of digital products and services are all having a “full-play” in our economy. But there are complex questions regarding the nature of regulation and quantum of taxes that policymakers confront.

On crypto assets, she said discussions are taking place in India, and that the government will continue to tax such transactions at source until more clarity among stakeholders emerges.

In the Union budget for FY23, Sitharaman had announced a 30% tax on any income from the transfer of virtual digital assets, including crypto, and a 1% tax deducted at source on all such transactions.

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