Compliance Cost

Context: The recent measures taken by the government to increase the scope of monitoring of high-value transaction remains an arbitrary process and require accountability on part of the tax authority.

Measures were taken by the government to Ease Taxation

• Increasing the scope of monitoring: 

• Third parties would have to report such high-value transactions in a statement of financial transactions, or SFT.
• Banks and some other financial institutions have so far had to include in their SFTs occurrences such as large cash holds in savings bank accounts of a single client.

• Adoption of Technology: The I-T department has long claimed that it will use “big data”, “machine learning”, “artificial intelligence” to crack down on evasion.

Issues with the measures taken

• Increases Compliance: Setting a threshold for transaction amount and the need of Permanent Account Number (PAN) for a larger transaction will increase compliance cost and delay the process.
• Questionable competence in cutting edge technology: The use of technology didn’t help in increasing the tax base or check tax evasion as promised.
• Arbitrariness in data collection: The list of such transactions appears extremely arbitrary — and previous such reporting requirements have not helped.

Way Forward: 

• Accountability in data collection: Justice Srikrishna Committee has elucidated how data fiduciaries must behave with personal and transactional data, the same should be emulated for the government too.

• If the taxmen want more data, they must explain why and what they will do with it, and where and how long they will keep it.