Dr X is a leading medical practitioner in a city. He has set up a charitable trust through which he plans to establish a super-speciality hospital in the city to cater to the medical needs of all sections of the society. Incidentally, that part of the State had been neglected over the years. The proposed hospital would be a boon for the region.
You are heading the tax investigation agency of that region. During an inspection of the doctor’s clinic, your officers have found out some major irregularities. A few of them are substantial which had resulted in considerable withholding of tax that should be paid by him now. The doctor is cooperative. He undertakes to pay the tax immediately.
However, there are certain other deficiencies in his tax compliance which are purely technical in nature. If these technical defaults are pursued by the agency, considerable time and energy of the doctor will be diverted to issues which are not so serious, urgent or even helpful to the tax collection process. Further, in all probability, it will hamper the prospects of the hospital coming up.
There are two options before you:
1) Taking a broader view, ensure substantial tax compliance and ignore defaults that are merely technical in nature.
2) Pursue the matter strictly and proceed on all fronts,whether substantial or merely technical.
As the head of the tax agency, which course of action will you opt and why? (250 words)
As the head of the tax investigation agency, I would opt for the first option of taking a broader view and ensuring substantial tax compliance while ignoring the technical defaults. My decision would be based on the following factors:
- Public Interest: The establishment of a super-speciality hospital in the neglected part of the State would be a significant boost to the healthcare system, and it is in the public interest to support such initiatives. By pursuing the technical defaults that are not substantial in nature, the agency would be hampering the prospects of the hospital coming up and, ultimately, impacting the public’s access to quality healthcare.
- Resource Utilization: Pursuing the technical defaults would divert considerable time and energy of the doctor, which could be better utilized in setting up the hospital and providing medical services to the people. Further, the agency’s resources could be used more effectively in pursuing more substantial tax compliance issues that have a greater impact on revenue generation.
- Compliance Culture: By ignoring the technical defaults, the agency can promote a compliance culture among taxpayers, where they voluntarily pay their taxes, resulting in increased revenue for the government in the long run.
- Cooperation of the Taxpayer: The doctor has cooperated with the agency and undertaken to pay the substantial tax immediately. Pursuing the technical defaults may sour the relationship between the agency and the taxpayer, making future cooperation less likely.
In conclusion, taking a broader view and ensuring substantial tax compliance while ignoring technical defaults would be the appropriate course of action for the tax investigation agency in this case. It would promote public interest, effective resource utilization, compliance culture, and maintain a positive relationship with the taxpayer.