An expert group with the mandate of suggesting measures to plug revenue leakages under existing tax laws will be constituted by March, the Income Tax Department has said.
"Constitution of the expert group to be done before the end of the financial year 2010-11," under the new Vision 2020 document formulated by the Income Tax Department, which seeks to modernise the direct tax structure in the country over a five-year period ending 2015.
The expert group on preventing revenue leakages will include departmental officers and outside experts like economists, statisticians, social scientists and other government agencies.
The 30-page document also talks about formulating a progressive tax policy, improving compliance, reducing collection costs and enforcing tax laws with fairness, besides addressing human resources issues.
Initiatives taken under the Vision 2020 strategic plan will be reviewed in 2013 to evaluate the effectiveness of the initiatives taken and make mid-course corrections.
As part of the exercise, the document also talks about setting up another expert group to develop a revenue forecasting model that will take into account the tax base and variables influencing revenue.
A multi-disciplinary research team on direct taxation will help improve the decision-making process at the apex level, it added.
Modernisation of tax system, the document added, was also necessary for effective implementation of the Direct Taxes Code, which is likely to come into effect from April 1, 2012.
"At an operational level, the transaction from a fifty-year-old Act to a new DTC would require effective communication with the taxpayers through an awareness programme about the new law," it added.
While making out a strong case for upgrading technology, the document said the Income Tax Department is dealing with 27 crore cases of tax deducted at source.
Direct taxes, which are a major source of revenue for the central government, have been growing at an average annual rate of 24 per cent over the last five years and have nearly trebled from Rs 1,32,771 crore in 2004-05 to about Rs 3,78,000 crore in 2009-10.
The contribution from direct taxes to central revenues grew from 43.79 per cent to 60.5 per cent between 2004-05 and 2009-10 and its ratio in the GDP from 4.1 per cent to 6.1 per cent during the same period.
The Thirteenth Finance Commission (2010-15) has projected that direct taxes revenue collection will go up to over Rs 8 lakh crore by 2014-15 and the direct tax-to-GDP ratio will improve to 7.62 per cent.