[Guest article by Kartik Varma, co-founder of a financial services start-up, www.iTrust.in. Now that the tax filing session for 2008-09 is over, Kartik has some interesting observations to share with us.]
Benjamin Franklin, inventor extraordinaire and a Founding Father of the United States, said that in this world there are only 2 certainties – death and taxes. Lets keep this post about positive things, and talk only about taxes.
OK, OK, I know no one likes to pay taxes and there is hardly anything positive to talk about this subject, but I wanted to share some of our observations on consumer behavior from the just concluded tax filing season. iTrust, like TaxShax, Skorydov, and TaxSmile among others, is one of the largest tax preparation and filing companies. Many of these companies will have their own observations to share, but here are iTrust’s humble submissions on the filing season that just concluded.
Better late than never: Like in other things in life (think of buying tickets for a journey or movie, or paying your mobile/utility bills), people leave tax filing for the last minute. This season also saw a huge surge in time leading up to and during the last week.
This is just so much a part of human behavior. Not sure how one can change this. Airlines recognize this trait, and exploit this to their advantage by raising ticket prices if bought closer to date of departure.
Price sensitivity: Our lowest rate was Rs 99 for a full service offering from online preparation to a physical filing followed by delivery of acknowledgement. That’s a lot of work and logistics for the price of 2 cups of coffee. Yet, clients often asked for a discount.
No surprises here that Indian consumers are highly price sensitive, even when the service is priced at rock bottom low levels. On the flip side, we expect service as if we are paying a gold standard price for it. The challenge for Indian service companies will be to keep cost to serve low while managing the customer/client expectations around high service levels.
Slow adoption of digital signatures: Starting at least a couple of tax filing seasons ago, the Tax Department has allowed Form 16s to be digitally signed. Yet, we found that HR and Finance departments at most companies did not have the right systems and process in place. Whether it was not having a digital signature, or having an expired one, some technology or behavioral issue delayed corporate adoption of digitally signed Form 16s.
There is no doubt that digital signatures make the Form 16 signing and distribution process easy. However, its probably going to take another few years before digitally signed Form 16s become mainstream.
Preference for Offline filing over Online: We offered both an online and the alternative offline solution to clients. Most clients chose the offline solution over the online process, and that too by an overwhelming majority.
While net banking and online bill payment has been popular and has put people into the habit of conducting financial transactions online, for some reason Indian consumers still seem to be weary of mass adoption of online tax filing. No doubt the systems, process and technologies of domestic tax filing services will improve in the coming years. However, as more Indian’s invest, buy homes or have non-salary income, more of us will have more complicated returns beyond just the simple ITR1 form. The more documentation that is needed, the tougher it will be become for a seamless online process that requires completely no offline component to it. This will be an interesting problem to solve for all tax filing companies. But, will this cause the Rs 99 rate to go up? Time will tell.
Payment Processes: Payment gateways and processes for online filing still need to improve. The handover from the gateway to the issuing bank back to gateway through verification by the credit card companies etc. still face some teething issues. Hopefully, these will get resolved as the technology improves in the coming years, and usage becomes more sophisticated.
Large tax preparation and filing companies in the US, like H&R Block still do a dominant part of their business through offline filing, even though online software programmes and supposed financial sophistication is much higher in the US. While India will have its own local rate of adoption of online tax filing, it will be a few years before we end up having a seamless and user-friendly online process that fosters mass adoption in the millions.
To Benjamin Franklin’s 2 certainties, death and taxes, let me humbly add a third – for more than 50% of the Indian tax paying population to use online filing is still going to be about 4-5 years away. Till then, keep the tax department happy by paying early and paying often.
What’s your opinion?