Boosting Voluntary Tax Compliance

GS 3 INDIAN ECONOMY – Resource Mobilization- Budgetary resources: Tax and Non tax


       Tax Collections will be severely hit because of the economic contraction caused by the COVID-19 pandemic.

       India is achieving compliance to taxes through a fine balance between enforcement and encouragement.The tax base has remained stagnant at around 6% of the population.The government needs to maintain its tax base through voluntary compliance.


  • Perceived complexity can discourage individuals from filing returns.(20% gap between taxpayers and returns filed proves this)
  • Government has announced measures to usher in transparency in the system.(changes in the taxpayer’s charter and faceless assessments.
  • India has introduced changes into its Changes in tax charter.
    • includes certain rights such as 
      • confidentiality
      • right to representation
      • fair treatment.
    • reducing compliance costs in administering tax legislation, holding its authorities accountable and publishing a periodic report of service standards.


  • Details of how these will be put to practice have not been spelt out.
  • A tax ombudsman can ensure that some of these standards are met.(cabinet approved the abolition of the quasi-judicial post in 2019.)
  • Countries like the UK and Canada have also tried to build trust for voluntary compliance through charters.(cannot be enforced, the success is limited)
  • Faceless Assessment(to automate the case selection,the to divest and distribution function of the assessing officer.)
  • can alleviate concerns of possible corruption.

Way Forward 

  • Taxpayers must ideally have an opportunity to explain their case in person.
  • Swift coordination is necessary among various units.


       Inconsistent and delayed decisions have often led to the poor success rate of the tax department in dispute resolution.For a fair and impartial system and a time-bound resolution ,the new processes-with reviews and anonymity must ensure efficiency in case selection and consistency in assessment.

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