CHENNAI: IT major Wipro’s chief Azim Premji advocated that the Centre and the Income Tax department must focus on increasing the tax base rather than utilising resources for “wasteful and repetitive litigation”.
An increase in tax base would not only improve the revenue productivity of companies, but would also improve public investment in health, education and social security, among others. “It is the expansion of tax base which would enhance the Tax-GDP ratio, rather than higher rates of taxes,” Premji said.
“Tax to GDP ratio in India is about 16 per cent, including state taxes. Whereas, in many developed countries, it is around 35-40 per cent. It is imperative that India’s tax-GDP ratio also climbs substantially, so that our public social investments can rise to the levels that are required,” he said.
While the Finance Minister had earlier claimed that the rate of tax compliance is as low as 36 per cent in India, Premji maintained that while the front-end technology process for voluntary tax payments is on par with other countries, the back-end data collection part needed to be automated. “I think there is a clarion call in the country to enhance the pace of Tax Administrative reforms. According to the recent Economic Survey, total pendency of cases in direct and indirect taxes is worth about Rs 7.6 lakh crore, which is close to 5 per cent of the GDP,” he said.
“The economic survey points out very succinctly that the success rate of appeals filed by the department at higher appellate forums is less than 30 per cent. It is a pointer that there must be a serious qualification process for issues litigated at higher levels,” he added.
While IT majors like Infosys, TCS, Wipro and Cognizant have been grappling with pending tax disputes for several years, Wipro has about Rs 1,900 crore in tax litigation, the company had said.