India’s tax authorities should work harder to make peace with taxpayers

Subscribe to enjoy similar stories. Indians have long had a confrontational relationship with the nation’s tax office, whose adversarial approach has crushed countless small businesses and international investors. This was meant to be the year the government fixed all that and repaired relations with taxpayers.

A few weeks ago, India’s federal budget cut taxes for many middle-class Indians. It also promised to present a new law that would drastically simplify how income taxes were calculated and paid. When the new bill was eventually made public, however, it was a disappointment.

As has happened too often in the decade-plus under the government of Prime Minister Narendra Modi, good intentions have been undermined by half-hearted implementation. Expectations were high. The tax office proudly said that it had put 150 officials on the job, and they had spent 60,000 hours redrafting regulations.

The new law is about half as voluminous as the old one. Yet, the general public and tax lawyers both seem to view this as a missed opportunity. If the government wanted more people to enter the tax net, it needed to completely reform the system.

It didn’t. Some parts of the rules have been simplified, but the basic structure remains the same. It does nothing to ease Indians’ basic concern: That the taxman will send them a demand for an arbitrary sum when they least expect it.

If the government intended a new compact with taxpayers, this isn’t it. The state needed to promise, through a new legal code, that it would take a less adversarial approach. Distrust and confrontation is at the heart of how the Indian taxation system works, and it is both nerve-racking and inefficient.