Herman Wouk’s line, “Income tax returns are the most imaginative fiction being written today” and Chris Rock’s words “You don’t pay taxes - they take taxes” resonate with all taxpayers. The Indian Revenue Service, particularly the Income Tax department, has always had the image of the quintessential villain. But don’t blame the taxfolks — blame their appraisal system. Currently, in India, an Income Tax officer’s performance is assessed based on the targets (in percentage terms) set by the government to meet its revenue shortfalls.
Despite many calls to change the appraisal system, it continues. On February 21, an office memorandum was issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, on “performance of field officers in respect of ‘Vivad Se Vishwas Scheme’ .”
The memorandum said how the officers fare in the dispute resolution scheme (there are direct tax litigations of over ₹4.8 lakh crore pending) will be an essential factor in finalising their annual performance appraisal reports as well as play a part in deciding their future postings.
A couple of days earlier, on February 19, assessing officers, Range Heads, Principal Commissioners of Income Tax, Chief Commissioners, were issued a memo that asked them to give details of their performance in respect of the same scheme for financial year 2019-20.
The intense pressure can be assessed by the fact that the newly elected team of IRS Association had urged the CBDT chairman to consider extending the March 31 target of meeting tax collection deadlines, statutory deadlines for taxpayers and tax officials, as well as Vivad Se Vishwas in view of Covid-19.
Says Binay K Jha, President of the IRS Association, “Considering the effect of government mandated 50 per cent non-attendance of Group B and C officials during the coming crucial days.. and its impact on the officers’ capacity to meet statutory time limitations matters...it needs to be considered and approvals of competent authorities may be taken so that date is suitably extended beyond March 31...."
On March 24, the Finance Minister did announce extension of deadlines. For example: last date for filing income tax return for FY19 has been extended to June 30; Vivad Se Vishwas Scheme extended to June 30 and no 10 per cent additional charge on paying principal amount involved in tax disputes. However, the root problem of linking performance with collections remains.
Tough targets
“Revenue officers are ready to face the stick for any mala fide errors, but they find no carrots for the job done,” says Jayant Misra, former General Secretary of IRS Association. “There has been a debate on the approach, whether it should be target linked or revenue forecast. The way forward will be in moving towards revenue forecasting method and motivating and rewarding officers who work with integrity and efficiency.”
As a field officer from the Income Tax department puts it, “the tax collection machinery is under stress as targets are not on economic parameters of the region where the officer is posted, but percentage terms based on the government requirement of the revenues.”
There is no flexibility on targets set and therefore there is always a fear of getting negative appraisal, another officer says. “The top down approach doesn’t always work if the field officers are not given a free hand depending on the field situations,” he says.
According to Prabir Jha, former Civil Servant, and an HR consultant, “The targets sometimes are out of step with economic realities. Assessing officers would rather step up their decisions to meet their number but this may not sustain in appellate courts. There is not enough training for most officers in dealing with the downstream appeals process.”
He adds, “The pressure of being accused of self-interest and possible punitive action also gets them to impose higher, even if misplaced, orders, which get reversed later. So the issues need a more systemic resolution.”
According to sources, Prime Minister Narendra Modi, in his recent meeting with Tax officials, has commented on the image they carry and raised the issue of “corruption”. Just as every taxpayer is not a cheat, every tax officer is not corrupt, says a serving officer.
Jha says, “Unfortunately, the system has mastered the art of digesting ill-gotten wealth and the appraisals reflect little on integrity violation. So it is really about political and administrative resolve, both of which have been very low.” The pressure on the few to take on the inefficiencies of the many is a challenge for Indian bureaucracy. “Finally, who really wants to hold anyone to accountability? The system seems too corroded for that.”
Infrastructure woes
A revenue service officer also faces challenges in promotions at the joint secretary, additional secretary and secretary levels. They are also governed by all-India transfer policy, which doesn’t depend on their attitude, aptitude or personal issues. “Things have changed at the centre, but at field levels infrastructure is an issue,” says a young IRS officer.
To ensure that the tax department is seen as a friend, government policies should assure the taxpayer of good services and social security, towards which end he pays taxes.