Tax experts say massive numbers demand urgent administrative reforms

Wealth generation and prosperity is on top of the mind during Diwali. However, one factor that is often underestimated is influence of taxes. Tax efficiency and transparency are paramount. This year has witnessed several events that may reshape the overall tax scenario across various sectors.

In a recent interview with CNBC-TV18, Dinesh Kanabar, CEO of Dhruva Advisors, and Mukesh Butani, Managing Partner at BMR Legal, delved into India's tax policies, reflecting on the changes since the last Diwali.

Kanabar highlighted the impact of tax figures, citing examples where demands running into tens of thousands of crores have the potential to disrupt companies and entire industries.

He pointed out, 'There is a very recent judgment in the case of Cognizant, where we are talking about ₹10,000 crore. In the past, I remember fighting litigation for one of the largest business houses, where ₹850 crore was at stake, and that was considered the biggest tax case in history. Today, it wouldn't even make the top 250. The numbers have grown significantly and have the potential to divert an organization's focus towards tax matters, which is an intriguing shift.'

Regarding tax policies, Kanabar mentioned, 'From a policy perspective, many positive changes have occurred. We have seen lower tax rates, as low as 15% for new manufacturing companies, although this rate is subject to the commencement of manufacturing. A 25% tax rate and a 35% rate with or without incentives are also attractive. However, the real question lies in how these policies are implemented, how tax authorities perceive taxpayers, and whether there is still a trust deficit or if this gap is narrowing. There is still much work to be done in this area.'

Butani addressed a significant concern—the gap between policymakers' intentions and actual administrative practices. The prevalence of high-pitched assessments and a surge in appeals indicate a need for more profound administrative reforms. Butani hinted at a perceived lack of diligence in implementation, suggesting that the solution lies not in seeking more advice or global best practices but in introspection—a collective examination of our own practices, akin to looking into a mirror.