1.1.
Direct taxes in India are administered by
Department of Revenue, Ministry of Finance, through Central Board of Direct
Taxes (CBDT), whereas Indirect Tax is handled by Central Board of Excise and
Customs. Refunds of direct taxes have been studied and recommendations
presented in this paper are limited to direct taxes collected by CBDT through
its field offices. Taxes are collected through a network of more than 13000
bank branches of 32 Banks of India. Accounting of tax received and expenditure
incurred in the process of administering tax is done by Principle Chief
Controller of Accounts, Department of Revenue. Refunds are, however processed
and paid by CBDT and only the amounts paid are captured in the accounts without
any robust mechanism of reconciliation with payments due, authorized and paid
by CBDT. There is need to carry out reforms in the administration of taxation
in general but process of refunds in particular. In this paper, current systems
of refunds in India, global experiences in taxation and way forward to make
refunds more user friendly and systematic have been dealt.
1.2.
Key activities in the administration of taxation
systems are the effective collection of taxes and management of tax refunds and
credits. Tax administrators face an ongoing challenge in meeting the taxpayers‘expectations
of empathy in service delivery and ensuring prevention of fraudulent and
erroneous refund claims. As a result of the global financial crisis (GFC) in
2008 and 2009, the challenge of tax administration grew considerably. The
United Nations International Conference on Financing for Development held in
Monterrey, Mexico in 2002 gave birth to the Monterrey Consensus[2].
Since its adoption on 22 March 2002, it has become the major reference point
for international cooperation in the development field. The first two areas of
financing for development found out by the Monterrey consensus were: “Mobilizing
domestic and international financial resources for development”. Tax
authorities were therefore solicited to cope with these two missions and to
enter into an effective cooperation between them. The heads and deputy heads of
tax administrations from 35 countries met in Seoul, Korea on 14-15 September
2006 and issued the Seoul Declaration[3].
The Declaration insisted on the necessity of continuous adaptation and
effective reform for the tax administrations. Reforms are aimed at improving
tax administration which includes improving processing and release of refunds
also.
1.3.
India has been striving to simplify taxation
systems. For filing returns, forms have been simplified and now taxpayers are
given the facility of filing their returns through an on-line system. Further
simplification in taxation is at its advance stage where Direct Tax Code[4]
(DTC) has been devised and modalities are being worked out for its
implementation. In the process of simplification of tax administration, refunds
are also getting a lot of focus. As of now returns are filed electronically as
well as in paper mode. Whether returns are filed electronically or through
paper mode, tax credits are invariably captured and stored on a portal which is
available for viewing of taxpayers. Despite tax credit being available on a
portal, there are gaps in authentication and validation of credits; which has
forced the processing of refunds to be handled in rudimentary manner. For a
country like India, the number and value of refund claims being made by
taxpayers are so huge that this task of managing refund takes a different
dimension.
1.4.
Currently there are more than 35 million assessees
out of which about 35% i.e. 13 million are getting refunds of direct taxes. The
total refunds during F.Y.
2011-12 amounted to Rs.935.70 billion[5],
of which only Rs.146.70 billion has been through e-mode under ‘e-refund’
through Refund Banker Scheme. E-refund is done only in cases where assessee
opts for it and refund amount is not more than Rs.50,000/. Currently e-refunds
and paper refunds other than cases dealt in scrutiny and large tax payers are
handled through refund banker scheme. Paper Refund is not only causing delay
but it is also not environment friendly. There are grievances of refunds
not getting released without seeking favour or released and sent to old address
which tax payer may have changed in the intervening period. There are also
cases of refunds being siphoned out by unauthorized persons due to lack of
validation mechanism in the refund process. It is, hence felt that efforts be
made to increase e-refunds in a phased manner, eliminating paper refunds
completely where many controls may be effected.
2.1. The
legislative and policy framework that revenue bodies operate within India is
very robust but often blamed of being rigid and too bureaucratic. Methods,
techniques and approaches employed to improve detection and treatment of
fraudulent and otherwise non-compliant refund claims are a major focus of
attention. The sensitivity of these topics poses a barrier to the free exchange
of the detail of the approaches which would otherwise enable revenue bodies to
learn more rapidly from others ‘experiences. In India, there is no established
and scientific mechanism to detect frauds in refunds. Despite huge data being
available with CBDT, only recently some scattered attempts have been made to
analyse data and find out cases of apparent frauds in refunds. Most of the
frauds have been unearthed due to information provided by intelligence or
outside sources. There is a lot of potential in data mining and data analysis
for validation and ascertainment of refunds.
2.2. In USA, the
mechanism to identify frauds has been established in a manner that a lot of
fraud cases are identified and fraudulent payments are stopped. However, number
of cases and increase in them indicates that problem is severe and there is a
need to have some deterrent force to discourage fraudsters to try out seeking
refunds. USA follows an elaborate post-refund risk management. They follow a
metric called the no-change rate where the numerator is the number of
audits that result in no change to what the taxpayer originally reported and
the denominator being the total number of audits. Audit results are tracked on
a monthly basis, and if the no-change rate increases, Headquarters staff
determines the root causes (training, selections, etc) of the lower rate of
audit results. By following this method a large number of cases of fraud have
been identified and more importantly, the payments of such refunds have been
stopped. For filing season 2009 the IRS identified 280,216 fraudulent returns
with false withholding and deleted 192,104 of them. Corresponding refunding
identified was $1,909,762,784. Refunds deleted were $1,437,911,310. It is
evident from the table that there is about 8 fold increase in identification of
fraudulent returns whereas success rate in stopping the payment against them
has further increased to more than 9 fold. In money terms, the cases identified
have grown by 1002% over this period from 2006 to 2009 where as payment stopped
in the corresponding period has increased by 1234%.
Trends in the rate of detection over recent years
Fraudulent returns and refunds (with false withholding) identified
and stopped
(Processing Years 2006 -2009)
Processing Year
|
Number of Fraudulent Refund Returns
Identified
|
Number of Fraudulent Refund Returns Stopped
|
Amount of Fraudulent Refunds
Identified ($)
|
Amount of Fraudulent Refunds
Stopped ($)
|
2006
|
52,255
|
35,523
|
271,180,566
|
188,715,519
|
2007
|
240,406
|
189,915
|
1,467,762,110
|
1,203,795,853
|
2008
|
380,656
|
306,128
|
1,959,992,377
|
1,683,912,973
|
2009
|
457,369
|
369,257
|
2,988,945,590
|
2,517,094,116
|
2006-09
|
1,130,686
|
900,823
|
6,687,880,643
|
5,593,518,461
|
Source: Draft TIGTA analysis of IRS data, verified by
CI except for 2006 (from Draft TIGTA report: Interim Results (March 24, 2010)
of the 2010 Filing Season).
2.3. Government of India also faces several
challenges in the field of refunds. Even though data on tax credits are
available and returns are also available with CBDT, in many cases refunds are
processed very late and it is alleged to lack transparency. There are cases
where tax credits do not match with claimed credit of the assessee, primarily
due to poor tax administration and lack of mechanism to ensure that credits are
reflected correctly against the bonafied taxpayers. There is a need to
establish a mechanism to capture Tax Deducted at Source (TDS) and tax credit data
and ensure that assessee/deductor and deductee data are reconciled without any
delay. Further it must be ensured that deductors are not allowed to play with
the tax credits of deductees. One activity which may be done immediately and it
may lead to huge customer satisfaction is ensuring transfer of refunds to the
bank account of assesses. In the process of refunds, there is a need to ensure
release of refunds in a defined and short time frame and credited to the bank
account of the beneficiary. This may be done by migrating from paper refunds to
electronic refunds. This process also has many challenges.
2.4. As of now all assessees have the option to
file tax returns either electronically or in paper form. Individuals and
non-corporates with the taxable income of upto Rs. 100,000 in a year are free
to exercise this choice. Similarly corporates are also required to file returns
electronically, if the taxable income is more than Rs.10 million in a year.
However, while filing returns assessee has the option to give bank details and
ask for refunds to be released electronically to the bank account of the
assessee. Alternatively, assessee may opt for payment of refunds through
cheque/paper instruments. In these cases, it is not mandatory to provide bank
details, hence e-refund is not possible in these cases. Even in the cases where
bank details are available, government is apprehensive about accuracy and
validity of bank details hence only the refunds of less than Rs. 50,000/- each
is handled electronically using NECS mode of fund transfer. This choice of a
smaller ceiling for refunds is driven by risk perception of the government,
where it is felt that risk involved in e-refund is more hence for amount upto
Rs.50,000/-, this risk may be taken. Further, there is a challenge of handling
huge data of refunds, its bank-wise segregation and transmission in a secured
mode. Refunds are also not processed electronically for all cases where Tax
credits as per Form 26AS, a form containing details of tax credits for all tax
payers, do not match with the amount of tax credits claimed by the
assessees. This tax credit mis-match is
a serious issue and government has to process refunds in all such cases after
manual scrutiny and processing of returns. Further, refunds to the assessees
handled by Large Taxpayer Units and cases taken up for scrutiny by the government
are also done through paper mode. Income Tax Returns
are filed by the assessees either electronically or manually. Corporate and
individual assessees with annual taxable income of more than Rs.1 million are
required to file their income tax returns electronically. Corporates and many
individuals file their returns using digital signatures. Electronic returns
filed by assesses either using digital signature or otherwise contain the
relevant data like MICR code, bank account number etc. required to process
refunds. Since bank details in the returns submitted using digital signature
are authenticated by the assessees, refunds to the given account numbers can be
done without any difficulty. Though possibility of giving wrong account number
in such cases may not be ruled out, it is the responsibility of asseesse to
ensure accuracy of data. However, In the case of electronic returns filed
without digital signatures ascertaining validity of data still poses a challenge. Possibility of frauds cannot be ruled out in these cases,
since in these cases returns are filed electronically, but in an unsecured
mode, returns can be filed by unauthorized persons to defraud the system.
2.5.
In the paper mode of returns filed by assessees, vital details of the
taxpayers are keyed in by the officials or authorized representatives of CBDT.
Data entry errors can be either bonafide or malafide where such large volume of
data is handled in a short span of time. Huge amount of tax is collected by the Large Taxpayer Units (LTUs).
LTUs deal with large taxpayer assesses who are also entitled for huge refunds.
Their refunds are processed manually after detailed scrutiny by the specially
created office (LTUs) to handle these assessees. However, refunds of LTUs may be switched over
to electronic mode without any difficulty. Cases of
assessment referred for scrutiny are also handled manually after the detailed
scrutiny by the respective ITOs. After scrutiny, these cases may also be
handled through e-refund mode.
2.6.
Once the returns are filed, there is time available till the refund is
made, to conduct post issue risk assessment activities and do all possible
activities in anticipation of the next filing period. Where the filing, or
claim, cycles are shorter, it imposes further constraints on the capacity of
revenue bodies to identify and respond to changes to maintain contemporary refund
settings between cycles. Similarly, reductions in the service period resulting
from improvements in service delivery, including electronic filing and
processing, could further increase the pressure on CBDT’s pre-issue refund risk
capabilities. In all cases of refunds, core issue of concern is validation of
bank account of the tax assessees with PAN number and name of the taxpayer to
ensure that money is credited into the accounts of the intended persons.
Presently as per Reserve Bank of India instructions, the only validation, third
party bank conducts is to ensure that the account no. in the pay instruction
(either cheque or e-mode) pertains to their bank/ branch. While clearing cheque
or receiving payment through e-mode receiving bank does not look at any other
detail associated with the bank account number. Thus the validation of accounts
with PAN number has to be done separately and before sending the payment
instruction. Hence, challenge is to validate a large number of bank account
numbers with their PAN numbers.
3.1.
Taxpayers with a bona fide claim to a refund of
overpaid tax have a legitimate expectation that their refund shall come to them
in a timely manner. The definition and perception of what constitutes a timely manner
is likely to be influenced by a range of factors (e.g. the strength of a CBDT’s
capability to quickly validate refund claims and obligations to pay interest on
delayed refunds). Tax authorities commit to respecting a set of taxpayers
‘rights that are either stated in law and/or set out in administrative
materials. These taxpayer rights are often accompanied by a set of service
delivery standards that identify targeted timeframes for the completion of
specified services.
3.2.
It has been observed that different types of
taxpayers have different levels of service expectations. There are huge amount
of tax paid by a small number of tax payers. In India, in the year 2012-13 only
213 top taxpayers paid more than 6.5% of the total direct tax collected in
India. About 90% income taxpayers have their income in the range of upto Rs.500,000
p.a. and their tax payment is only about 10% of income tax collected in the
country. There are huge numbers of taxpayers who pay very less amount of tax
hence they are only marginal taxpayer. Thus only 10% taxpayers[6]
contribute to more than 90% income tax collected in India.
3.3.
The table below indicates the number of
taxpayers paying more than 50% of the total direct tax. Such tax payers need to
be treated differently than the taxpayers who are large in number but their
contribution towards the tax kitty is very small. From this table it is clear
that a lot of taxpayers are only marginal taxpayers and their refund amounts
are very small. Such taxpayers have potential of giving wide publicity about
their experience of the refund process. Thus, they act as catalyst in
encouraging or discouraging the other marginal taxpayers to come to the fold
and start paying tax. Such taxpayers shall, therefore be treated differently.
Since the refund amounts are very small, it shall be handled through automated
system and random validation checks about the authenticity of the claims of the
taxpayers. In these cases, possibility of fraud may not be ruled out, but
monetary impacts of frauds are likely to be insignificant. Out of 9.7 million
cases of refunds 9.1 million taxpayers have got refunds of less than
Rs.100,000. Such large number of cases is only amounting to INRs 105 billion
which is only 11% of total refunds. Majority of these taxpayers are getting
refunds after due verification of credits available in their accounts. If the
bank account validation is also carried out, then such refunds would have very
rare possibility of going to wrong person. Thus a huge chunk of taxpayers would
get their refunds very quickly and they would act as ambassadors of Government
of India, advocating about the efficiency of tax administration in India.
Concentration of Domestic Tax Collection in Selected Countries[7]
|
|||
Largest tax payers at national level
|
|||
Country
|
Number
|
Percent of Total Taxpayers
|
% of collection
|
Peru
|
1,600
|
0.14
|
58
|
Argentina
|
2,450
|
0.25
|
51
|
Brazil
|
30,000
|
0.33
|
92
|
Colombia
|
5,922
|
0.41
|
65
|
Angola
|
250
|
0.44
|
80
|
Hungary
|
300
|
0.5
|
50
|
Nicaragua
|
400
|
0.67
|
75
|
Bolivia
|
1,350
|
1.35
|
66
|
Paraguay
|
1,000
|
1.7
|
60
|
El Salvador
|
1,005
|
1.68
|
75
|
France
|
52,000
|
2
|
50
|
Sri Lanka
|
2,024
|
2.02
|
92
|
Mali
|
53
|
4.8
|
60
|
Congo
|
50
|
5
|
65
|
Gabon
|
350
|
5.8
|
91
|
Uruguay
|
11,000
|
9
|
83
|
3.4.
In the case of Large Taxpayers Units (LTUs), a
more personalized approach needs to be followed. Taxpayer must be provided best
possible services to let him feel good about his contribution to economy of the
country. Single window clearance of all tax related matters shall be dealt by a
specialized set of office. Such office shall take care of all taxation related
matters of such units.
4.1. There are several risks
associated with the process of refunds in the country. These risks are changing
with the advent of technology and globalization of economy. Current and
emerging risks in the field may be categorized under the broad heads having
bearing on clients, transaction, service and organization. OECD in its report
on Tax Payments has tabulated these risks in the following manner:
Sources of current and emerging repayment risks[8]
|
|
Current
risks
|
Emerging
risks
|
Client
Risks
Ø
Identity fraud – fictitious or stolen identities.
Ø
Specific high risk industries.
Ø
Specific high risk occupations.
Ø
Regional location.
Ø
Distinct population group.
|
Client
Risks
Ø
Foreign nationals or new citizens.
Ø
Identity fraud (especially using new technological medium),
phishing and pharming.
Ø
Cash flow problems for taxpayers due to economic climate,
especially where refund is a repayment in a preliminary/provisional refund
system.
Ø
New businesses.
Ø
Organised criminal involvement.
|
Transaction
Risks
Ø
Claims where 3rd party data is unavailable.
Ø
Hidden controlling or influencing 3rd party.
Ø
Collusion between credit provider and
claimant.
|
Transaction
Risks
Ø
On-line filing and associated weaknesses (e.g. authentication).
Ø
Low value-high volume fraud.
Ø
Fictitious Credit fraud.
|
Service
Risks
Ø
Weakness in return filing channels, notably on-line filing.
Ø
Technology – complexity and provides opportunities for
misuse/fraud.
|
Service
Risks
Ø
Out of country fraud attacks.
|
Organisation
Risks
Ø
Legal complexity.
Ø
Friction between service and compliance outcomes.
Ø
Resourcing imbalances across service and compliance work.
|
Organisation
Risk
Ø
Maintaining adequate resourcing.
Ø
Revenue or refund targets – pressure to restrict refund losses
through compliance crack-downs.
|
4.2. Risks associated with
clients/taxpayers may be significantly mitigated by establishing a system of
maintaining identity and validation data of taxpayers and put a mechanism in
place to run through the data to prevent frauds in manipulation of identities of
taxpayers. Other frauds may be dealt and shall be dealt by extensive research
of the risks but identity frauds may be mitigated with minimum efforts. These
frauds have huge monetary impact, thus its implementation is advisable. First
step to eliminate this risk is to establish a process of transferring credits
to the taxpayers using electronic refunds to the duly validated bank accounts.
4.3. Before migrating to
e-refunds, it needs to be seen whether it is possible to do so with the
available taxpayer information in the returns filed by the tax payer or
additional information may be required to be collected. If 100% e-refund is
possible using the available information then same may be facilitated
immediately. It is noticed that in the IT return forms, taxpayers are given the
choice of getting their refunds electronically transferred to their accounts or
through cheque. However, currently refunds are made through electronic mode to
the asseessees who have opted for e-refund and their refund amount is not more
than Rs.50,000/-. All taxpayers opting for transfer of refunds to their
accounts may be easily covered under e-refunds without any delay and ceiling of
refund amount.
COUNTRY
|
Year begun
|
Rate of e-filing
|
% move in e-filing 2004/2008
|
e-filing target & year
|
|
2008
|
2003/4
|
||||
Australia
|
1990
|
88
|
80
|
8
|
95(2009)
|
Canada
|
1992
|
54
|
48
|
6
|
+2%/year
|
France
|
2001
|
19
|
4
|
15
|
24(2009)
|
Ireland
|
2001
|
75
|
40
|
||
Korea
|
2004
|
81
|
35
|
||
The Netherlands
|
1996
|
85
|
80
|
5
|
100
|
Spain
|
1999
|
41
|
9
|
32
|
43(2009)
|
Turkey
|
2005
|
99
|
0
|
99
|
100
|
United Kingdom
|
2000
|
66
|
13
|
53
|
75(2010)
|
USA
|
1986
|
58
|
40
|
18
|
80
|
4.5.
In India, electronic filing has taken a quantum leap. During 2010-11,
76% returns of direct taxes were filed electronically. All corporates are now
required to file their returns through electronic mode. During 2011-12 total
16.43 million taxpayers filed their returns electronically which increased to
21.48 million in the year 2012-13. By 31st Aug 2013 it has already
touched 14.12 million which is more than 50% of the electronic returns filed
during the corresponding period in 2011-12[10]. During last five years from 2007-08 to 2011-12, there has
been a growth of about 900% electronic filing of returns. Against 2.17 million
taxpayers in 2007-08 who have opted for electronic filing of returns, 21.49
million taxpayers who did electronic filing in 2008. This growth has to be
enhanced further to achieve 100% e-filing. Till this year, electronic filing
has been made mandatory for corporate taxpayers and High Networth Individuals.
However, approach of government has been by and large persuasive to make
taxpayers comfortable with technology and its usage.
Financial Year
|
2007-08
|
2008-09
|
2009-10
|
2010-11
|
2011-12
|
2012-13*
|
No. of e-returns
|
2,169,367
|
4,830,122
|
5,073,977
|
16,433,684
|
21,486,807
|
14,119,365
|
4.6.
Electronic filing of tax and returns would reduce the manual intervention in tax
administration process thus reduces the possibility of errors/mistakes
happening in the data management of tax. It will greatly improve the
refund process also. In manual returns, relevant data from the returns is captured manually
at centres of CBDT. There are possibilities of errors creeping in while
entering the data in CBDT’s systems. During 01/04/2008 to 31/03/2010, out of
the nearly 1.10 lakh returned refund records of ECS/NECS, 91 thousand (82%)
records attributed to “account description incorrect/invalid MICR code/invalid
NECS MICR code”. Similarly during 01/04/2008 to 31/03/2010, out of the 177,000
records of paper-based instruments returned nearly 158,000 (89%) records attributed
to “house locked/no such address/party shifted” reasons. Such returned refunds
(electronic as well as paper based) are a miniscule percentage of total refunds
of about 13 millions. Even in the electronic data entry systems (On-line),
errors by the individuals are possible. The taxpayers frequently make mistakes
in filling details at the time of filing returns. The mistakes may also be
attributable to non-implementation of appropriate validations to check the PAN
number and MICR code vis-à-vis bank account number in the software used to file
returns .Thus the possibility of errors may be minimized at the data entry
stage itself.
4.7. At
present it is not mandatory to file electronic returns. Further, currently bank
details are mandatory only if taxpayers opt to receive refund through e-mode. In
such cases, beneficiary account number and MICR code is provided in the return
filed by the tax payer. Using MICR code e-refund is done using NECS method of
transfer of funds. IFSC is
used for electronic payment applications like Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT)
and Centralized Funds Management System
(CFMS) developed by Reserve Bank of India (RBI). The Code has eleven characters “Alpha Numeric”
in nature. First four characters represent bank, fifth character is default “0”-
left for future use and last six characters represent branch. Through this
code, bank and branch may be captured and settlement would be smoother than
ECS. Further IFSC code has wider reach than MICR and all bank branches are
covered under this coding. Settlement of funds through ECS takes longer
time and controls are also not very effective, therefore payments through NEFT shall
be encouraged.
4.8. Assessment of risks in electronic transfer of
funds: Assessees
who file their returns using digital signature, provide the bank details and
PAN number which is used by the department through a secured mode without any
manual intervention. In such cases bank details are authenticated by the tax
payer. In other cases, bank account details are either captured through manual
intervention or collated in unsecured mode.
5.1. As a tax reform process, a beginning may be made by
Government of India to migrate from paper refunds to 100% e-refund. In the
cases where bank details of tax payers are available, bank account number, PAN no. and name of
assessee shall be validated and refunds issued electronically. During 2010-11,
there were 21.9 million taxpayers out of which 14.6 million have provided their
bank accounts[12]. About 1 million taxpayers filed their returns
using digital signature, hence their accounts don’t need to be validated. Further,
there are more than 1.5 millions taxpayers who have got their refunds in the
same bank account during last two years, which indicates that account number is
correct and refund is going to the intended beneficiary. The cases of returns where bank details are not provided,
it is essential to get the bank details from the tax payers. Therefore, it is
necessary to make it mandatory to provide bank accounts and bank details in the
returns. In
the IT Returns, option of seeking return through cheque or draft shall be
amended to make it mandatory to write the account no. and IFSC code of the
bank. Refund cheque shall be issued in favour of taxpayer alongwith account no.
written in front of the name. Further a rider may be added that, government
reserves the right to refund the due amount using electronic refund method even
though option has not been exercised by the taxpayer.
5.2.
Before attempting to migrate to 100% e-refund, a
campaign needs to be launched to encourage tax payers to file their returns of
direct taxes through on-line mode. This would eliminate the errors relating to
PAN/TAN in the data uploaded by them and further reduce the problems of paper
work to some extent. Mechanism may be devised to offer incentives for e-filing
e.g. electronic refunds shall be processed before the manual refunds. Since the
reform process involves huge number of taxpayers, it would be appropriate to
follow an approach where implementation of reforms is done in a phased manner. In the first phase individual and non-corporate
assessees who have filed their tax returns using electronic mode, with or
without digital signature or paper returns but opted for e-refunds and provided
the bank details shall be covered. It shall include all assessees who have provided bank
details in their returns and got the refunds in the past two-three years in the
same bank account. These assessees would get their refunds through electronic
mode are paid refunds only when their tax credits available in Form 26AS matches
with the details given in the returns filed. Further, the corporate taxpayers
who have filed electronic returns using digital signature shall also be covered
under e-refund. In
all these cases, e-refund may be done without any monetary ceiling on refunds.
5.3. For the
cases where bank details of assessees are available but refunds are not
processed in first phase, refunds can be processed in this phase. Account and
Pan number validation may be exhaustively done and e-refund may be done for all
validated cases. This shall
include corporates and those who have filed returns electronically. Assesses who have not opted for e-refund to their bank
account shall be dealt subsequently.
6.
Conclusion
6.1. Refund initiatives have to necessarily have an
integrated approach to the expectations of service delivery levels and
mitigation of refund fraud risk. Any effort without a judicious balanced
approach may lead to either increased grievances or huge loss to the exchequer.
Management of risks associated with taxpayers’ registration and ascertaining
their identity before release of refunds are areas of significant importance in
the mitigation of refund
fraud risk. This includes an emphasis on the ability to discover relationships
between different sets of data pertaining to assesses. Improvement and
enhancement of the process of identification and treatment of fraudulent, or
non-compliant, refund claims involve developing sound structured database and analysis of
data-sets from wide range of risk perspectives. Timely and reliable access to banking data and
its validation with tax data (PAN no./ TAN no. etc.) would enable government to
enhance tax return preparation and refund services. Further, providing validation
at the time of filing returns improve the accuracy of filing and associated refund
claims.
6.2. Indian tax administration deals with refunds in a very
unique and abnormal manner. It is only system in India where Consolidated Fund
of India is allowed to be operated by a bank directly while releasing refund
payments. Further, it is a system where government releases the payments and no
mechanism is put in place to ensure that payments are reconciled with accounts
and revenue collected. With computerization, massive data of tax collection and
refunds may now be analyzed scientifically and reconciliation be carried out in
an effective manner.
[1] Ajay S Singh, ICAS 1994 batch is Controller of Accounts in
Central Board of Direct Taxes, Ministry of Finance, Government of India, views
expressed are personal.
[2]
See
http://www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf
[3]
See
http://www.oecd.org/dataoecd/0/14/37463807.pdf
[5]
Accounts at a Glance 2011-12, o/o Pr. Chief Controller of Accounts, CBDT
[6]
Para 73 and 74 of the DTC Report a available at : http://164.100.47.134/lsscommittee/Finance/49_Final%20DTC%20Draft%20report.pdf
[7]
Source dos Santos (1994)
[8] Tax Repayments: Maintaining the Balance
Between Refund Service Delivery, Compliance and Integrity, May 2011 report of
Organisation for Economic Co-operation and Development.
[9] Source: Respondent survey; OECD Comparative Information
Series (2008); Netherlands Ministry of Finance and United Kingdom HMRC website
:
[11]
--ibid--
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