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Big ‘black’ bucks

Big ‘black’ bucks
Getting the country’s carefully built trillion-dollar-plus parallel economy by dauntless tax evaders, often with the help of direct and indirect tax collectors, busted merely through tough warnings from the government, has achieved little over the last 65 years.

 There is no genuine reason to believe that these crafty Indian ‘big black money’ hoarders parking unaccounted wealth in the country and across the world’s 26 safe tax havens will come clean by September 30 in response to the wishes of Prime Minister Narendra Modi. 

Every government in the past had used strong warnings as also announced seemingly attractive voluntary disclosure schemes and amnesty programmes to entrap big tax evaders and black money hoarders. However, they failed to yield.

 Big black money hoarders are habitually strong risk takers. Their profile is generally very impressive. Many of them are well-known politicians and their family members, senior judges, bureaucrats, businessmen, legal professionals, doctors, actors, policemen and tax men. They come from almost every section and profession of the society.

Modi himself may be a simple and honest person and his ‘Mann Ki Baat’ may move the heart of millions of good and honest Indians, but that is unlikely to purify the souls of millions of dishonest tax evaders and make them surrender to his appeals. 

Last month, the PM Modi, in a meeting, said: “I have promised that there will be no inquiry into the source of the undisclosed income and assets if the declaration is made voluntarily. That is why I am saying it is a good chance of becoming part of a transparent system… It will be better that you take advantage of the window provided and save yourself from difficulties that you can face after September 30.”

 If his advice does not cut much ice with tax evaders, it will only strengthen the opposition criticism about BJP’s failure to keep its election promise to unearth the huge black money held by Indians at home and abroad.

The PM may have also been wrongly briefed about the elasticity of India’s income tax net. Later, Modi reportedly pitched for nearly doubling the country’s income tax base to 10 crore assessees from the current 5.43 crore while addressing the first ever revenue service officers’ joint conclave, Rajasva Gyan Sangam, in the presence of Finance Minister Arun Jaitley and senior bureaucrats in the finance ministry. 

Modi had outlined a five-point charter for tax administrators terming it ‘RAPID’ that stands for Revenue, Accountability, Probity, Information and Digitisation. The prime minister had asked tax authorities to take action against tax evaders to increase the number of tax payers. 

To the surprise of many, the finance ministry issued a corrigendum the very next day saying “In this regard it is clarified that though the PM asked the Income Tax department “to widen the tax base and take suitable action against the non-filers and tax evaders, no specific target to expand the tax base to 10 crore was prescribed. The original press release dated June 17 may please be treated as revised to this extent. The mistake in the press release dated June 17 was inadvertent, which is regretted.”

Such an official clarification to the prime minister’s widely reported point of view with regard to the need for expanding the tax base to 10 crore assessees might have been unnecessary considering the fact that India’s well earning, good spending middle-class base is now close to 30 crore.

 The total registration of passenger cars across states, annual car sales by manufacturers, annual smart phone shipment and sale in the last few years, annual petrol and diesel sales to consumers, property construction and sales across the country, domestic and foreign air travels by Indians, consumption of imported luxuries, average $50 billion worth annual private gold import in the last five years, over $72 billion annual income repatriation by overseas Indians, etcetera, do not quite support the current official estimate of domestic tax assessees at only 5.43 crore, of which nearly 90 per cent belong to the annual income slab till Rs 5 lakh for tax assessment. 

Less than five lakh tax assessees show annual income of Rs 20 lakh and above. This is unacceptable, if not totally ridiculous, in the world’s 9th largest economy in dollar terms boasting a population in excess of 130 billion people.

Honest tax collectors are finding it increasingly difficult to deal with influential tax evaders. While big tax claims on large business enterprises are often legally contested through arbitration and other routes, smaller assesses generally face the music of adamant assessors looking for old proofs and documents that are either irrelevant or can’t be easily made available. 

For instance, many are confused with recent government ads advising voluntary disclosure of black money or undeclared assets and pay 46 per cent tax before September 30 to avoid strong tax department action. 

What happens if an undeclared property asset in a city like Delhi or Mumbai that was acquired 25 years ago for a small sum of Rs 10 lakh by a family for residential purpose, the current market value of which has appreciated 15 or 20 times over the original purchase value? Under the voluntary disclosure scheme, the property is required to be valued as on June 1, 2016 and 46 per cent tax to be paid on it. 

Few property owners can afford to make such disclosures to pay taxes worth crores. Their black money will remain unearthed.Unfortunately, there appears to exist a big gap of understanding of the prime minister’s ‘Mann Ki Baat’ on tax assessment by the tax department. Only a week ago, Finance Minister Arun Jaitley said the tax department needs to start trusting assessees. Jaitley is right. The government’s total direct and indirect tax collection in the last April-June quarter surged to a record rupees three lakh crore. 

Most ordinary assessees are once again confused though big ones really don’t care. Black money held by rich Indians in 26 tax havens is conservatively estimated at over $500 billion. 
Will these hoarders ever voluntarily disclose their foreign assets and accounts?IPA

Also under the scanner 

Jackie Chan
Reports show that Chan owns at least six companies that are managed by the Panama law firm. These firms are based in the British Virgin Islands. The holdings include companies called Jumbo Jaz Investment, Jackie Chan Ltd. and Dragon Stream Ltd. Post the leak, Chan was amongst the firsts to deny the reports.

Amitabh Bachchan
The documents show Bachchan as a director of four shipping firms in the British Virgin Islands (one company) and Bahamas (three companies). All of these are in operation since 1993. These companies do business worth millions of dollars. Bachchan’s daughter-in-law Aishwarya has also been listed in the papers.

Lionel Messi
In addition to the tax evasion conviction that he is facing in Spain, Messi is also on the list of public figures involved in the leak. Reports show that Messi and his father are charged with three counts of tax fraud and could face prison time for up to two years. Messi and his father also owners of a Panama company called Mega Star.


Nantoo Banerjee

Nantoo Banerjee

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