Reforming Indian Income Tax Enforcement

The purpose of this paper is to document and trace the causes of the poor and declining revenue performance of the income tax in India and to suggest measures for improvement based on a review of international experience. The paper starts by reviewing evidence that the performance of the income tax in India has been poor compared with other countries with similar per capita GDP. Furthermore the performance has a negative secular trend. It is then argued that this is due to low or falling compliance rather than other handicaps. This can. in turn. be traced to ineffective administration due to a reliance on enforcement tools with limited potential, inappropriate organizational structures, lack of computerization and inefficient allocation of limited manpower resources coupled with a growing taxpayer population. International experience in administrative reform is reviewed paying particular attention to Mexico. the Philippines. Singapore and Spain and the process of computerization that has taken place in many CIAT countries, particular attention is paid to information system reform. organizational restructuring and auditing in order to derive appropriate policy lessons for India.