Increased tax transparency in inevitable. The momentum is building now for the public to know how much tax is being paid by the companies. They either need to disclose the same or face reputational damage. Traditional stakeholders like shareholders, creditors, and investment analytics are typically focused on companies’ strategy for growth and profitability. Fighting tax evasion and avoidance is essential to secure greater fairness and economic efficiency. The public has become more sensitive to tax fairness issues in the context of increased pressure on public finance. Large multinational companies may engage in aggressive tax planning which can lead to distortions of the internal market and the level playing field between taxpayers.
Understanding taxpayer return filing trends is very important in a country like India, where tax evasion is rampant. The tax department will be making public the list of taxpayers whose tax arrears amount to more than Rs.1 crore during this financial year, as an attempt at naming and shaming such individual which will help taxpayers understand the rationale behind various steps taken by the tax department in the field of income tax.
Taxpayers have no option but to file appeals against high-pitched assessments, completely disproportionate to the level of actual income, which was the norm till recently as they do not have capacity to pay for such huge demands. In many cases, the appeal of the taxpayer is pending and the recovery of demand is stayed by the higher authorities. If it is found after the judicial determination that the demand is completely unjustified, the reputation is already damaged which cannot be regained. The tax officers who have raised such false demands do not stand the test of judicial scrutiny and do not face any defamation in front of the right thinking members of the society.
The Supreme Court has stated that the details disclosed by a person in his income tax returns are personal information and hence stand exempted from disclosure under section 8(1)(j) of the RTI Act. Unless and until, it involves any larger public interest, it cannot be disclosed. There has been a heated controversy regarding whether the information in income tax returns can be made public, particularly in the case of government employees and politicians. In countries like Norway, Finland, etc tax disclosures to the public is mandatory. Howsoever, the taxpayer gets the information as to who has viewed his tax return.
A package of measures should be presented to boost tax transparency, concentrating on the most urgent issues and including a proposal for the automatic exchange of information. The main objective should be a fair and efficient corporate tax system. Who the key stakeholders are, is fundamental to understand how best to engage and communicate around tax transparency. At the end, it is a question of balancing the right to privacy with the benefit of public disclosures that should determine whether and what tax information should be made public. The shaming of alleged tax defaulters, whose appeals are pending would not benefit the public. Rather it would backfire on the tax authorities. In any case, when the question of greater public interest comes up, individual right should be compromised and there should be complete disclosure to the public.
 Girish Ramchandra Deshpande Vs Cen Information Commr & Ors. SLP(C) No. 27734 of 2012
The views expressed are personal.
Ipsita Mishra, Associate @ SAPAA. She did her BALLB from NLU Odisha. A writer, Food enthusiast and an Adventurer who loves Traveling. She Primarily likes working at the Confluence of Law & Policy.
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