Recently, Prime Minister stated that India has moved from tax terrorism to tax transparency.
What is Tax Terrorism?
- The term ‘tax terrorism’ was first used by the current Prime Minister to describe the adversarial approach adopted by tax authorities under the UPA.
- It was primarily used in the backdrop of a clarification in the nature of the amendment to the Income Tax Act by Finance Act 2012 to retrospectively tax Vodafone.
- It is alleged that the political executive frequently modifies the Tax Acts, sets higher and has kept higher taxation rates for evasion of tax, sets unreasonable revenue collection targets and even uses tax agencies as a political tool.
- In order to achieve these predetermined targets, the Tax administrators implement the tax laws harshly, launch prosecutions for minor tax evasions or procedural violations, send out bulk notices without adequate legwork, conduct frequent surveys to harass the businessmen.
- These overzealous acts of the Tax Collectors have allegedly earned them the title of Tax Terrorists.
- The most common canard to allege Tax Terrorism is that Revenue authorities issue notices at discretion without any groundwork.
- Examples of tax terrorism: Denying all refunds or pass adverse adjudication orders in the name of realising the target of revenue