Heat on tax evaders could be endgame for black money

Chances of tax evaders coming under the scanner is rising due to the implementation of the GST, greater use of technology and exchange of information between countries

New Delhi: The noose is tightening around tax evaders.

Be it the implementation of the goods and services tax (GST) or the greater use of technology to link and profile translations or the stepped up international exchange of information between countries, the chances of tax evaders coming under the tax department’s scanner is increasing.

This probably explains why the recent income disclosure scheme received such a phenomenal response from tax evaders with almost 65,000 taxpayers coming forward to declare their undeclared income. More than Rs65,000 crore of domestic undeclared income was declared under this one-time window that closed last month.

The tax return forms under GST approved by the GST council last week mandate sharing of the details of the profit and loss account as well as the balance sheet of the manufacturer or the trader. This means that the indirect tax payments can be linked to the direct tax payments made by the same entity. In addition, GST network is adopting a permanent account number (PAN) or PAN-based registration system ensuring effective monitoring of all transactions.

The tax department has also contracted L&T Infotech for more effective mining of the vast amounts of information at its disposal. Under Project Insight, all data available with the tax department like tax return forms, tax deducted at source, information about high value transactions from annual information reports will be linked and analysed.

This will add to the steps already taken by the department using its existing resources. Investigations by income tax authorities in the last two years have resulted in detection of undisclosed income of Rs56,378 crore. Further, through detection of non-filers, the tax department has recovered Rs6,000 crore in taxes.

The stepped up sharing of information among countries as well as revision in double taxation avoidance agreements is also narrowing the avenues for tax defaulters.

India amended its tax treaty with Mauritius to prevent round-tripping of funds. Such talks are also on with Cyprus and Singapore.

Negotiations with Switzerland over automatic sharing of information are also at an advanced stage.

The government has initiated prosecution proceedings against many tax evaders after information received through various sources. In a press conference on Saturday, Finance minister Arun Jaitley had said that from the so called HSBC list, Rs8,000 crore of assessment has been made and 164 prosecutions have been filed. In disclosures made by the International Consortium of Investigative Journalists, Rs5,000 crore has been detected as unlawful income of Indian citizens overseas and 55 prosecutions have already been filed.

In the Panama cases, the government has made 250 references to other countries with regard to unlawful assets held by Indians outside.

Enhanced reporting requirements under the global base erosion and profit shifting norms also narrow the scope of global corporations to evade taxes.