When our tax refunds arrived in May, within six months of filing our return, we thought we were dreaming. Since it normally took years, something must be afoot we thought, and decided to pay North Block a visit. There we were astonished to learn that computers had already completed 95 per cent of this year's returns.
Our meeting began with a common lament — why do so few Indians pay income tax? We soon realised, however, that this might be the wrong question. In March 1992, the year the reforms began, there were 78 lakh assessees; this rose to 1.4 crores by 1998 and climbed to 3.4 crores by March 2003. In a nation of 100 crores, this may seem small, but if you subtract 65 per cent of the population that is rural and exempt from tax, it leaves 35 crore urban people; divide this by 5.2 persons per home, and you get 6.8 crore urban homes. Assume one taxpayer per family, and divide 6.8 by 3.4, you realise that this is every second urban family. Even after subtracting corporate and multiple taxpayers per family, it still means more than two out of five families are on the tax rolls — and this the best testimonial to our economic reforms!
Despite these gains, the average Indian holds his tax officer in contempt; he thinks him rapacious and corrupt, and he's probably right. My corner bania wants to pay his taxes but he refuses to be victimised. My accountant has been issued two PAN numbers by mistake and the ITO has the gall to ask for Rs 500 to fix his own mistake. The bribe for an individual assessment is Rs 10,000, for a company Rs 25,000, and for avoiding ''scrutiny'', it is Rs 20,000 to 50,000. No wonder the tax department is known as the ugliest face of the Indian bureaucracy.
On this scene walks in the sorcerer, Vijay Kelkar, clutching Chapter 3 of his report, innocently titled ''Reform of Tax Administration'', and with Jaswant Singh's support, he begins to cast a spell. At the heart of the sorcerer's enchantment is to break the link between the officer and the taxpayer, and remove the official's discretion, and create transparency through technology. Although only two per cent of the returns are scrutinised today, officials arbitrarily decide which ones, and this brings corruption. Soon, thanks to new software, even the commissioner will lose this power. Each morning the computer will decide which cases to scrutinise.
The computer's decision will be based on a mismatch between a person's consumption and income. Hence, the biggest task engaging the department is to collect and monitor consumption data — who is spending how much on cars, cell phones, credit cards, hotels, airline tickets, and even jewellery. Since 95 per cent of the gold is now purchased through banks (and not smuggled), jewellery purchases can be monitored. The permanent account number (PAN) is crucial to all this, and the Board realises the mess they have made of it. Hence, they have outsourced this activity, and from July, a PAN card will be couriered within 10 days on demand. Banks will provide refunds, there will be no challans, and no one need visit the taxman.
Towards the end we were still sceptical, and we asked, won't corrupt officials be able to get around this? Bhagwat Swarup, who is implementing many of these reforms, gently answered, ''Just as computerisation in the railways took away the clerks discretion to give a ticket, so will ours.'' If it does, generations of grateful citizens will remember Jaswant Singh's innings at the North Block.