We have to file taxes online or suffer harsh penalties; but
private vendors, who manage the tax-filing system, are not accountable
Our reports on the huge transition problems caused by the bungling by information technology (IT) majors handling e-filing systems led to a reassuringly frank debate on Moneylife’s website. Insights shared by insiders reveal all that is wrong with the handling of India’s large IT infrastructure. And we, the ordinary taxpayers, are being harassed because of the absence of proper checks & balances.
Consider this. MCA21, a showpiece project of the ministry of company affairs (MCA), incorporates financial details of over 0.65 million companies and is designed to automate all processes related to compliance under the Companies Act. Infosys bagged the project, with a $50 million bid, nearly seven years after Tata Consultancy Services (TCS) developed it. A month after the changeover, at a study circle meeting between Congress MP Sanjay
Nirupam
and chartered accountants (CAs), one heard many horror stories of how
the failure of MCA21 was causing harassment and acrimony with clients.
We tried to get an explanation, but TCS and Infosys repeatedly told us
to get answers from the government, while our email to MCA minister
Sachin Pilot was ignored.
Infosys later responded to what it called ‘speculative reports’ saying:
“Transitioning a large application suite like MCA21, at the best of times, is complex. Successful transition depends upon the current state and stability of the applications and the full cooperation of both service providers. We believe that we have fulfilled all our obligations.”
Does it mean that TCS was to blame? In fact, when TCS was called back to set things right, Infosys had made no significant changes to the system. If Infosys had, indeed, fulfilled its obligations, why wasn’t the system working? Taxpayers are not concerned with anything else. After all, it is not a free service. The government earned $50 million from Infosys on the MCA21 contract and collects money from those who access the data. Problems with the Pune passport automation contract, bagged by TCS and doggedly pursued by our consulting editor Vinita Deshmukh, are similar. The government officials are happy to remain silent while TCS, the private contractor, is not permitted to discuss the matter.
All this raises several questions. Why did Infosys bungle so badly on the takeover of MCA21 from TCS? Our sources say that Infosys may have underestimated the requirement of trained personnel to handle the project, despite the 120-day handover period. The ministry had to recall TCS to sort out issues after the month-long problems showed no signs of ending and led to user outrage. Our sources in the IT sector are categorical that companies responsible for sloppy transitions—as in the case of MCA21 and TRACES, would have been sued if it were an overseas contract.
Why has Infosys made such a hash of the TDS reconciliation analysis and correction enabling system (TRACES)? TRACES was meant to improve on the NSDL’s (National Securities Depository Limited) tax information platform which Infosys launched in November 2012. Why is automation of passport offices by TCS not getting past its teething troubles and frustrating ordinary persons who want to bypass the entrenched system of touts and bribes?
The answers are complex but, at their root, is the fact that the government is treating us, the voiceless taxpayers, like guinea pigs to be used for experiments with technology. That is why large systemic changes are rolled out and mandated without a clear understanding of long-term consequences. I would trace this problem back to what was perceived as the ‘stupendous’ success of India’s transition to an automated capital market and paperlesstrading system. The leaders of this transition, who I have interacted with extensively, always asserted that ‘forcing’ a switch to a paperless or dematerialised trading system, instead of a slow transition, was the key to its success. It ensured that automation of India’s capital market took place in record time and its success was apparent in soaring stock indices and explosion in trading volumes.
After almost 15 years, we realised that the investment is mainly from foreign institutional investors (FIIs), who also whip up frothy volumes through algorithmic trades. Meanwhile,
over
10 million retail investors exited the market, unable to deal with
automation or uncomfortable with compromises such as signing a power of attorney (POA) with a broker and giving away control over their investment portfolio to strangers. Poor returns by mutual funds, and mis-sold insurance products,
drove them out of the capital market altogether. The lopsidedness of
the capital market dominated by FIIs became evident only after the 2008
financial crisis sent India’s five-year dream rally crashing. By then,
the super success of the dematerialisation experience became the
template for all automation programmes. The accepted logic was that the
government should go ahead and announce mandatory e-filing for taxes and
other compliances. People may complain and struggle to comply, but the
system will take care of itself or taxpayers will
simply learn to live with the pain. In fact, tax avoidance may have
only increased, but there is no way of establishing it, as yet.
So we now have a strange system that prescribes harsh penalties for taxpayers for any slip or delay in filing returns or transmitting TDS, but private contractors, who manage the tax-filing system, are apparently not accountable to anybody. The bigger irony is that the finance minister (FM), in his Budget speech said that he will “make e-filing mandatory for more categories”, even though large parts of the government are still in paper mode. Most members of parliament (MPs) do not even use email for official communication. Even Sam Pitroda, dubbed the technology czar, evoked much amusement when his only ‘twitter conference’ was like a Vigyan Bhavan briefing. The Reserve Bank of India is proposing to penalise cheque usage, but many of our MPs are unfamiliar even with the terminology of electronic fund transfer systems. If this is the level of disconnect between government and the people, isn’t it time to pressure policy-makers to initiate corrective action?
Here are a few solutions that we, the people, demand:
1. The launch of mandatory e-filing projects must be preceded by a pilot project where project specifications and the user experience in the pilot is clearly shared in the public domain and feedback incorporated before a formal rollout. This must also apply to sensitive databases, such as Aadhar, which will store biometric data and can have serious consequences, if compromised.
2. IT contracts, especially those involving private contractors, need to be transparent and their terms of reference placed in the public domain. Concepts such as SLA (service level adherence) and OLA (operational level adherence) are routine in international contracts and must be mandated in India as well.
3. The government mandates e-filing of various tax returns. It has also transferred the job of tax deduction and transmission (to the exchequer) on taxpayers on the pain of harsh penalties for delays or failure. In this situation, the government’s responsibility to provide smooth and functioning systems must also be spelt out. This would include: a) an immediate public announcement about systemic problems; b) automatic extension of the time provided for filing returns without requiring the taxpayer to provide explanations; c) a well-laid out procedure for investigation and appropriate penalties for those responsible for faulty service or system failures; d) a clear process for smooth transition management, which may include short-term deputation of project experts to the new company until it stabilises.
Unless we the taxpayers speak in a strong united voice, the government will get away by ignoring our concerns.
Our reports on the huge transition problems caused by the bungling by information technology (IT) majors handling e-filing systems led to a reassuringly frank debate on Moneylife’s website. Insights shared by insiders reveal all that is wrong with the handling of India’s large IT infrastructure. And we, the ordinary taxpayers, are being harassed because of the absence of proper checks & balances.
Consider this. MCA21, a showpiece project of the ministry of company affairs (MCA), incorporates financial details of over 0.65 million companies and is designed to automate all processes related to compliance under the Companies Act. Infosys bagged the project, with a $50 million bid, nearly seven years after Tata Consultancy Services (TCS) developed it. A month after the changeover, at a study circle meeting between Congress MP Sanjay
Nirupam
and chartered accountants (CAs), one heard many horror stories of how
the failure of MCA21 was causing harassment and acrimony with clients.
We tried to get an explanation, but TCS and Infosys repeatedly told us
to get answers from the government, while our email to MCA minister
Sachin Pilot was ignored.
Infosys later responded to what it called ‘speculative reports’ saying:
“Transitioning a large application suite like MCA21, at the best of times, is complex. Successful transition depends upon the current state and stability of the applications and the full cooperation of both service providers. We believe that we have fulfilled all our obligations.”Does it mean that TCS was to blame? In fact, when TCS was called back to set things right, Infosys had made no significant changes to the system. If Infosys had, indeed, fulfilled its obligations, why wasn’t the system working? Taxpayers are not concerned with anything else. After all, it is not a free service. The government earned $50 million from Infosys on the MCA21 contract and collects money from those who access the data. Problems with the Pune passport automation contract, bagged by TCS and doggedly pursued by our consulting editor Vinita Deshmukh, are similar. The government officials are happy to remain silent while TCS, the private contractor, is not permitted to discuss the matter.
All this raises several questions. Why did Infosys bungle so badly on the takeover of MCA21 from TCS? Our sources say that Infosys may have underestimated the requirement of trained personnel to handle the project, despite the 120-day handover period. The ministry had to recall TCS to sort out issues after the month-long problems showed no signs of ending and led to user outrage. Our sources in the IT sector are categorical that companies responsible for sloppy transitions—as in the case of MCA21 and TRACES, would have been sued if it were an overseas contract.
Why has Infosys made such a hash of the TDS reconciliation analysis and correction enabling system (TRACES)? TRACES was meant to improve on the NSDL’s (National Securities Depository Limited) tax information platform which Infosys launched in November 2012. Why is automation of passport offices by TCS not getting past its teething troubles and frustrating ordinary persons who want to bypass the entrenched system of touts and bribes?
The answers are complex but, at their root, is the fact that the government is treating us, the voiceless taxpayers, like guinea pigs to be used for experiments with technology. That is why large systemic changes are rolled out and mandated without a clear understanding of long-term consequences. I would trace this problem back to what was perceived as the ‘stupendous’ success of India’s transition to an automated capital market and paperlesstrading system. The leaders of this transition, who I have interacted with extensively, always asserted that ‘forcing’ a switch to a paperless or dematerialised trading system, instead of a slow transition, was the key to its success. It ensured that automation of India’s capital market took place in record time and its success was apparent in soaring stock indices and explosion in trading volumes.
After almost 15 years, we realised that the investment is mainly from foreign institutional investors (FIIs), who also whip up frothy volumes through algorithmic trades. Meanwhile,
over
10 million retail investors exited the market, unable to deal with
automation or uncomfortable with compromises such as signing a power of attorney (POA) with a broker and giving away control over their investment portfolio to strangers. Poor returns by mutual funds, and mis-sold insurance products,
drove them out of the capital market altogether. The lopsidedness of
the capital market dominated by FIIs became evident only after the 2008
financial crisis sent India’s five-year dream rally crashing. By then,
the super success of the dematerialisation experience became the
template for all automation programmes. The accepted logic was that the
government should go ahead and announce mandatory e-filing for taxes and
other compliances. People may complain and struggle to comply, but the
system will take care of itself or taxpayers will
simply learn to live with the pain. In fact, tax avoidance may have
only increased, but there is no way of establishing it, as yet.So we now have a strange system that prescribes harsh penalties for taxpayers for any slip or delay in filing returns or transmitting TDS, but private contractors, who manage the tax-filing system, are apparently not accountable to anybody. The bigger irony is that the finance minister (FM), in his Budget speech said that he will “make e-filing mandatory for more categories”, even though large parts of the government are still in paper mode. Most members of parliament (MPs) do not even use email for official communication. Even Sam Pitroda, dubbed the technology czar, evoked much amusement when his only ‘twitter conference’ was like a Vigyan Bhavan briefing. The Reserve Bank of India is proposing to penalise cheque usage, but many of our MPs are unfamiliar even with the terminology of electronic fund transfer systems. If this is the level of disconnect between government and the people, isn’t it time to pressure policy-makers to initiate corrective action?
Here are a few solutions that we, the people, demand:
1. The launch of mandatory e-filing projects must be preceded by a pilot project where project specifications and the user experience in the pilot is clearly shared in the public domain and feedback incorporated before a formal rollout. This must also apply to sensitive databases, such as Aadhar, which will store biometric data and can have serious consequences, if compromised.
2. IT contracts, especially those involving private contractors, need to be transparent and their terms of reference placed in the public domain. Concepts such as SLA (service level adherence) and OLA (operational level adherence) are routine in international contracts and must be mandated in India as well.
3. The government mandates e-filing of various tax returns. It has also transferred the job of tax deduction and transmission (to the exchequer) on taxpayers on the pain of harsh penalties for delays or failure. In this situation, the government’s responsibility to provide smooth and functioning systems must also be spelt out. This would include: a) an immediate public announcement about systemic problems; b) automatic extension of the time provided for filing returns without requiring the taxpayer to provide explanations; c) a well-laid out procedure for investigation and appropriate penalties for those responsible for faulty service or system failures; d) a clear process for smooth transition management, which may include short-term deputation of project experts to the new company until it stabilises.
Unless we the taxpayers speak in a strong united voice, the government will get away by ignoring our concerns.
Sucheta Dalal is
the managing editor of Moneylife. Subscribers get free help in
resolving their problems with select providers of financial services.
She can be reached atsucheta@moneylife.in
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