Burgeoning tax base

Burgeoning tax base

Santosh Gangwar, minister of state for finance, told Rajya Sabha yesterday that 12.6 million new tax payers were added last financial year to the tax base. It was an impressive 27% growth in tax payers but in line with what was recorded the year before demonetisation. The jury may be out on demonetisation's impact, but what is clearly discernible is that India's tax payer base has been growing at an impressive clip over the last four years. Over a decade of building a database which was used to connect the dots in billions of transactions people engage in has begun to pay off.
The next step has to be an increase in the level of sophistication with which information technology tools are used. Under the old manual system where everyone from different arms of government worked in silos, it was possible to evade taxes. But now with electronic transactions increasing rapidly , it is possible for tax department to actually prevent large scale evasion by mining the data thrown up in electronic transactions.
Demonetisation's provided significant leads when the rush to deposit cash resulted in the identification of 1.8 million people whose transactions did not match their tax profile. While tax department is probing these transactions, the advent of GST presents the possibility for tax officials to move to another level. Even a GST pilot project a couple of years ago in Maharashtra showed that by matching direct and indirect tax databases it was possible to curb tax evasion. Over the next few years, these opportunities will multiply. But to tap them there has to be a faster upgrade in tax department's technological capability. There is another big imponderable: corruption within the tax department itself. Apart from better technology, the question of who guards the guardians will need to be answered.