The Central Board of Direct Taxes (CBDT) says it is badly short-staffed. Conservative estimates by a recent report of the special CBDT committee, sent to the government, has recommended that the income tax (I-T) department needs to recruit at least 8,965 officials within the next five years for smooth functioning. Their annual cost: Rs 150 crore.
The 8,965 officials include an estimate for an extra 760 sanctioned personnel in the Indian Revenue Service (IRS).
Apart from this, the department would have to create 42 posts of Principal Chief Commissioner of Income Tax (Principal CCITs), 74 CCITs, 116 Senior CCITs and Deputy CITs. This would have to been done through simultaneous abolition of posts in other grades, said the report.
However, these are just conservative estimates. The actual requirement of skilled manpower is much more, if the restructuring is done on the basis of three models presented by the report.
The department would require 61,000 additional officers and staff in the tax department if recruitment is done on the bases of Revenue Collection Approach, over 50,000 people under the Expected Tax Payers Approach and nearly 15,000 people under the Workload Management Approach.
Additional staff would also be required for intelligence and investigation.
However, to limit the cost burden on the state exchequer, the report suggested a conservative way by giving additional responsibilities and suitably upgrading posts in the higher supervisory grades. This also aims to address the existing anomaly in the IRS cadre, where no posts exist in the upper two grades of Higher Administrative Grade and Apex Scale.
The CBDT, Department of Revenue, Ministry of Finance, is the cadre controlling authority for IRS (Income Tax) officers. Ideally, the cadre structure of each Group-A central service should be reviewed once in every five years, but there have been only four such reviews of IRS officials in the past three decades.
It is an irony that despite being the highest source of revenue generation for government, lack of manpower and stagnation has plagued the tax department. The cost of tax collection, at 49 paise for every Rs 100 tax, is the lowest in the world. And it is only because the department is shockingly low on manpower, said a senior CBDT official.
The official also added that adequate manpower could help reduce the tax burden on citizens by scaling-up revenue collection.
Quoting an earlier study by Indira Gandhi Institute of Development Research, the report stated that the potential tax loss in the country was over 50 percent of the tax actually collected during 2007-08, as Rs 8,58,264 crore are not accounted.
Consequently, there was a tax gap of approximately Rs 1,71,653 crore (assuming taxation at the median rate of 20 percent). Black money amounted to over 18 percent in the economy and the departments ability to curb tax evasion is correlated to manpower available for investigation, intelligence, assessment and other departmental work, goes the argument.
The report also said that Interpol had placed the size of hawala transactions in India at 40 percent of the countrys GDP.
Moreover, the pressure on the department had increased substantially with the rising challenge of tackling complex issues relating to taxation of e-commerce, mergers and acquisitions, special economic zones, international movement of capital, off-shore transactions and so on.
Many Assessing Officers (AOs) move their files without adequate diligence, as the workload is high. The report warned that if the number of Aos remained unchanged, the number of assessees per AO annually would increase to 11,490 and the scrutiny workload would increase to 230 by the end of 2013. An AO can handle a maximum of 150 scrutiny files in a year.
Assuming the historical growth rate between 2001-2002 and 2007-2008, the number of taxpayers is expected to grow 1.28 times to over 43 million in 2013-2014. Similarly, revenue, which had grown 4.55 times from Rs 69,198 crore in 2001-2002 to Rs 3,14,468 crore in 2007-2008, is expected rise to Rs 14,30,829 crore in 2013-2014.
At present there are over 33.6 crore registered tax payers in the country, roughly 3 percent of the population.