Finance ministry study group to improve voluntary compliance to check tax evasion

In a move aimed at addressing the issue of black money in a proactive manner, the finance ministry has set up a ''study group'' for improving voluntary compliance, and thus plug the revenue leakage, through appropriate measures that would help to motivate tax evaders to disclose their unaccounted income.

The decision comes in the backdrop of finance minister Pranab Mukherjee's announcement of two groups being constituted to look at ways of tackling black money as also a propose amnesty scheme to unearth unaccounted wealth.

The Income Tax Department, has said in a statement, regarding the proposal,  ''Complexity and innovation in business structures, new financial products, a large number of taxpayers, growth in international trade supported by rapid expansion of e-commerce, and commoditisation of tax avoidance schemes are some of the factors leading to increased compliance risk for the tax administration.''

The proposal added, ''It may not be possible for the Income Tax Department to address these risk factors through the traditional tools based on verification and enforcement action alone.''

According to the statement the challenge before the department was to ascertain the extent of compliance costs for different taxpayer categories and develop focused programmes to reduce the compliance costs for improving voluntary compliance.

The ministry's study group would devise ways to increase direct tax collections and suggest measures for effective curbing of the tax evasion in the changing business scenario, which includes curbing the generation of black money.