Prime Minister Narendra Modi said in the first week of November that it is important to make tax officials more effective. This is one of the most significant directives to improve their performance. Here, I am writing on how to effectuate the prime minister's directive.
The PM has elaborated it is a part of the government's commitment to reducing tax litigation, cut down tax arrears and make tax administration accountable. He has asked the finance ministry to change the performance appraisal system of tax officers to reflect whether their orders and assessments have been upheld on appeal. "This will deter corruption and also motivate officers to pass correct orders," Modi had said. I agree with this directive. The new appraisal system will make officers, both on direct and indirect tax side, more accountable and efficient and tax-payer friendly.
Lately, attitude of the officers has been to somehow pass an order to collect more revenue, so that they do not have any responsibility attached in the decision. They fear vigilance department and the Central Bureau of Investigation (CBI). This is merely an excuse. Not in one case, so far, as I know, the CBI or the vigilance department has taken action in cases of genuine orders where reason was the consideration and no illegitimate deal was there.
The Ministry of Finance's move will be, basically, what we may call quality audit. The quality of order is important, not the number of orders passed. As I have mentioned, so far, officers are simply disposing of cases, passing orders on the side of the revenue, so that the tax payer is pushed to the appeal stage. At the appeal stage, if the order is not sustained, then it should be recorded in a registrar that has to be opened at the office of the chief commissioner. There is a problem here. Orders are not always passed at the appeal stage in the same year. By the time these get passed, the confidential performance report would have been written in that year as it is written on a year-to-year basis. Also, the officer concerned may have been transferred by then. To obviate this problem, the registrar for an officer must be maintained with the chief commissioner so long, as he is in that region. If he goes to another jurisdiction, then at the time of writing the report, a note from the chief commissioner will have to be called for. This may be a complicated process, but it will serve the purpose of ending the present trend of passing orders, always with an eye on quantity rather than on quality.
There is another method suggested by experts. Performance can increase if salary is linked to the pay increase. In the Sixth Pay Commission there was a suggestion, but the proper criterion could not be worked out. The problem of identifying targets, scientifically, cannot be minimised.
In a tax department, if the number of assessments adjudicated is taken, then it is not of much use, as some sections have more tax payers and others less. All jurisdictions are not same. If one goes by the seizure, it can be very easily faked. In any case, the present system of annual confidential report does take into account the performance of an officer in respect of the work done by him.
But, ultimately relation between a senior and a junior matters the most. Officers have been marked poor in confidential reports, because they did not arrest some innocent man whom the boss wanted to harass for personal reasons. When the whole society is pre-dominantly corrupt, it is no wonder why many officers are also corrupt.
To conclude, top officials must now try to make the reporting system as objective as possible. For officers, who pass orders of assessment, a tab must be kept on how many of their orders are upheld in appeal.