The Fourth Test Match between England and Pakistan was being played at the Oval in 2010. Asif Iqbal bowled two consecutive no balls. But surprisingly the third one was also a no ball. How come? An English journal carried out a sting operation on a book maker. It was revealed that Dawood Ibrahim's bookies in Dubai were informed in advance that two consecutive no balls will be bowled. But there was double crossing in the bargain, resulting in an unexpected third consecutive no ball on the instructions of bookie Mazhar Majeed. The third no ball cost Dawood Ibrahim Rs 50 crore.

The World Cup is on. Cricket has shown that there is big money to be made in black. According to book makers, Rs 60,000 crore had already been placed in bets on the World Cup matches starting this week. Informed sources estimate the bid amount to be around Rs 20,000 crore. All these bid moneys are tax-free and hidden from the tax department, why? Our gambling laws make betting illegal in all sports except horse racing. The entire betting industry has gone underground. The Cricketer's Bible, Wisden, has advised the Indian government to legalise betting in cricket and recover normal revenues.

Studies by economists estimated the mafia economy at over 50 per cent of our GDP. Adulterated oil business (remember the murder of Nashik Collector) is estimated to be over Rs 17,000 crore. Real estate dons account for a total business of Rs 4,000 crore a year in black deals. Sex racket is set to yield a total business of Rs 500 crore. Waste generated from condemned wagons coaches and locomotives of Indian Railways yield an illegal profit of Rs 3,500 crore . Illegally mined coal gets Rs 400 crore in West Bengal. Lottery sales are banned, but illegal sale across India is estimated to be around Rs 7,200 crore a year. All this goes tax-free. Is it not time to for the Government of India to wake up and amend the laws so as to facilitate the income-tax Department to take action?

Black Money in Foreign Banks

Everybody from the Supreme Court and the Prime Minister down is talking about methods to bring Indian money deposited in secret foreign accounts back to India. The Government has been telling the Court that secrecy clause of the foreign banks forbid revelation of names. It is also stated that our Double Tax Avoidance Agreements are insufficient to deal with this problem. There are tax havens across the globe such as Cayman Islands, Gibraltar, Switzerland etc., A suggestion has been made to amend the income-tax law in such a manner that countries and tax havens which refuse to share information about secret funds of Indian nationals may be declared non-cooperative jurisdictions. The suggestion comes from the panel set up by the Finance Minister in the CBDT. If an Indian company pays royalty to a foreign company in such a non-cooperative jurisdiction, the withholding tax which stands uniformly at 10 per cent today may be doubled and made 20 per cent. The relevant expenditure by way of royalty can be denied deduction in the assessment of the Indian company so that the cost of doing business with the foreign company in the tax havens will substantially go up.

Transfer Pricing Laws

Our transfer pricing laws were first made in 1992. There has been a sea change in the operation of multi nationals in the past 15 years and our Transfer Pricing law has failed to keep pace with these changes. A suggestion has been made to deem any transaction with a company operating in a tax haven as a related party transaction and bring it under transfer pricing scrutiny. It can be an effective method for forcing entities operating from low or no tax jurisdictions to come up with disclosure of the real profits made from Indian operations. This will also force Indian multinationals to restructure their global holding structure. These measures will help the income-tax Department to get over legal hurdles and practical problems in accessing information about moneys secreted abroad.

The tax department in India is second to none in unearthing tax frauds. Who unravelled the enormous loss of capital gains tax because of the racket in Mauritius residency certificates? It was a lowly income-tax Officer in Mumbai. Whose idea was it that a proper investigation of the Source rule and the Residence rule will result in unearthing a sizable revenue of Rs 11,000 crore in the Vodafone-Hutchinson deal? Again, it was a lowly I-T Officer from Mumbai. And finally, who ignited the investigation in the 2G scams resulting in a loss of Revenue of Rs 1,76,000 crores? Again it was lowly I-T Officer from Delhi. All that is required to fight the menace of black money is to give freedom of action to the tax department.

Will the Finance Minister act on these suggestions? The Budget will tell.

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