Page 440 - ES 2020-21_Volume-1-2 [28-01-21]

Fiscal Developments 67

taxpayer confidence in the integrity and accountability of the IRS; and has significant
independent powers. It is headed by the National Taxpayer Advocate and has a local presence
and accessibility through Local Taxpayer Advocate and Low-Income Taxpayer Clinics.
• Similarly the Office of the Taxpayers' Ombudsman (OTO) established in 2007 in Canada is
mandated to review and address the complaints relating to the services provided to a taxpayer
by the CRA, thus working to enhance CRA accountability in its service to, and treatment
of, taxpayers through independent and objective reviews of service-related complaints and
systemic issues.
• Based on best international practices of Canada, US and UK, an independent Tax Ombud system
was established in South Africa in the year 2013 through Tax Administration Act (TAA). The
Tax Ombud is appointed by and reports directly to the Minister of Finance, with the mandate to
review and address any taxpayer complaint regarding any service, procedural or administrative
matter arising from the application of the provisions of the Tax Act

A Possible solution
• International experience suggests an ombudsman system is necessary for ensuring protection of
taxpayer's rights. However the institution, in India's past experience, was not effective and was
abolished. A possible reason may have been inadequate independence from the tax department.
Therefore, there is a need to reinvigorate the systems of grievance redressal in India, and
incorporate a more holistic view of enhancing customer experience and protecting taxpayer
rights. In such a case to avoid the conflict of interest, ensure fair dealings and consequently
build the trust between taxpayers and the concerned tax authority, it is imperative that the
redressal organisation has adequate teeth and is independent of the tax department. Such an
institution would thereby make the ‘Honoring the Honest’ platform more successful by ensuring
accountability and trust in the tax administration system.

TRENDS IN GOVERNMENT FINANCES: CENTRE, STATES AND
GENERAL GOVERNMENT

Central Government Finances

2.24 During the year 2019-20, the structural reforms initiated by the Central Government to
boost the economic performance had fiscal implications for the economy. As a result the Fiscal
Deficit for 2019-20 Provisional Actuals stood at 4.6 per cent of GDP, which was 0.8 percentage
points higher than the Fiscal Deficit envisaged in 2019-20 RE, and 1.2 percentage points higher
than Fiscal deficit in 2018-19. The effective Revenue Deficit which captures the shortfall in
current receipts over current expenditure also increased by 1 per cent of GDP to reach 2.4 per
cent of GDP in 2019-20 PA relative to 2018-19 (Figure 9).

2.25 The Medium Term Fiscal Policy (MTFP) Statement presented with Budget 2020-21
pegged the fiscal deficit target for FY 2020-21 at 3.5% of GDP, after providing adequate
space for fiscal impact of the reforms adopted by the Government in FY 2019-20. Major fiscal
indicators of the Central Government and their growth rates are presented in Table 5 and Table
6, respectively.