Addl Inputs Sought - Corruption in Business Taxes

Below are the key issues, root causes and solutions as highlighted by you in regards to Corruption around Business Taxation. Please review and share any additional inputs you may have. We will soon be putting together a whitepaper for submission to
the key stakeholders.

Transparency International India

Corruption related to Business Taxes - Key Solutions

1. The business houses must be instructed by the IT department to use certain software, which would make their financial reporting transparent
2. A strict tab should be kept on the income of the IT inspectors
3. Inspectors caught taking bribes should be criminally prosecuted
4. CA firms advising businesses on tax frauds should have their licenses cancelled permanently
5. Fines of up to 50 times should be imposed on businesses caught indulging in tax frauds
6. The authority and discretion of the IT officials should be reduced through introduction of systems and they must be made accountable for their work through KRAs
7. A committee should be formed to review the business tax system and plug the loop holes which are exploited by corporates
8. Tax authorities should work on a proactive system which catches irregularities and minimizes harassment and discretion
9. Where irregularities are found via systems, surprise audits must be done as a check and balance
10. Business income tax rules should be simplified so that businesses do not need a third person to interpret them
11. GST should be introduced as soon as possible
12. Not issuing a ‘pucca receipt’ for any sale should be made a criminal offence
13. Processes should be made system driven and human intervention should be reduced
14. Fixing up a time frame and removing all discretionary powers by then will greatly minimize opportunities to accept bribes.

Business Tax Corruption - Issues and Root Causes

1. Huge sum of money goes as fixed bribe from large export houses to customs department through intermediaries
2. To close the Income Tax and VAT assessments the higher ups takes bribes worth lakhs of rupees
3. Businesses bribe IT officers to overlook their tax frauds
4. CAs advice businesses of ways to save on taxes illegally
5. Typically, a business entity decides how much income tax it would pay. Accordingly, the books of accounts are adjusted by booking purchases, expenses etc. very often through sham transactions
6. Businesses collude with their partners to show losses and save on taxes
7. Businesses get a part of their pending taxes waived off by paying bribes
8. They also get penalties cancelled by bribing the officials
9. Officials sometimes simply send notices to many organizations for hassle value and creating more opportunities to earn bribes
10. CAs have always been dealing with IT officers a certain way and hence tend to flout rules assuming things cannot be done by following the process
11. Businessmen, Chartered Accountant & Officials of different departments join hands to exploit the loopholes in the rules
12. IT officers accept bribes to make easy money on the side
13. One of the best ways for a business to save on taxes is to show losses
14. Income tax officials also misuse the powers that they have to force businesses to pay bribes
15. There is a lack of surprise checks for large businesses by IT officials
16. Monthly payments are made to the IT inspectors by businesses to keep the collusion under wrap
17. Cases of such corruption haven’t been strictly dealt with, by the judiciary
18. Business income tax rules are complex and not easily understandable
19. High rate of taxes is also another reason for corruption. more