For an effective economic system, the implementation of a perfect tax policy is the most challenging task. It is more difficult for the State government because along with the taxation system, investments, maintaining a regional balance and competition with other states (particularly for foreign investment) has to be considered while deciding on a tax policy. With its smooth implementation, it is also necessary to maintain a low tax collection cost, less trouble to the taxpayers, yet generate maximum collection of taxes.
Currently, there is a lot of discussion going on about the Goods and Services Tax (GST), but whichever policy is implemented, I am trying to stress on two most important expectations from Maharashtra’s tax system.
In the present taxation system of the state, the most urgent aspect is the constitution of a formal mechanism to decide on the collection target. In other countries, such system or mechanism not only decides the tax collection target, but also studies the revenue pattern of different sectors, their growth rates and accordingly how much tax can be collected. This process helps determine the problem areas in all the sectors and hence this gets reflected in the tax collection figures as well.
Presently, Maharashtra’s tax collecting body itself decides the target which seems to be achievable. This whole process is just an ‘ad hoc’. Thus, no opinions or suggestions come forward as to which sector can generate more tax revenue. Only such a mechanism can largely benefit the tax collection revenue of the state.
The tax collection of the State depends on commodities and trade. No research done in the State determines the total tax turnover from different trade sectors, how they change or what are the figures. All it has to show is the GDP or the gross income of the State. I am very sure if proper research is undertaken, it will add to our revenue. To increase the tax revenue collection in the State, an independent mechanism has to be implemented; this is one of the major expectations from the Maharashtra government.
The other aspect is the compliance cost. The tax policy should be hassle-free and comfortable for the taxpayers. To fill a tax statement of 42-pages is a tedious work for anybody. Most of the forms are complicated, lengthy, and also costly for the taxpayers. Unfortunately, no government has ever considered to give a thought to these aspects. This compliance cost should be minimum is another expectation from the State government.
Bhushana Karandikar, Former Deputy Commissioner of Sales Tax
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