The Government is reportedly mulling a variant of Voluntary Disclosure of Income Scheme (VDIS), this time round focusing on offshore accounts of Indian residents. From the contours of the scheme as gleaned from the media reports, it appears the Government has built a sizeable and authentic database of the shenanigans of Indian residents who have stashed away assets abroad from income generated in India and not disclosed to the tax authorities here.
This database is thanks to the excellent work done by the offshore tax units of the Income-Tax Department in such familiar hideouts as Mauritius and the tax information sharing agreements with many countries, which then begs the question — why not go for the jugular of these tax evaders instead of mollycoddling them with a scheme bordering on amnesty?
The reliefs offered for coming clean are quite a few, and none of them is to be scoffed at — penalty which can normally range from 100 per cent to 300 per cent of the tax sought to be evaded would be pegged at the lower end — that is, 100 per cent, the interest payable on the tax due would be softened, and the icing on the cake would be reprieve from prosecution that can lead to imprisonment.
A parallel is being drawn with the similar scheme floated by the US government.
Admission of weakness
It is strange that we latch on to US examples when we should not and discard US models when we should be paying attention to them. The US has, all these years, steered clear of amnesty schemes on the ground that they amount to admittance of inability of the government in reading the riot act to the crooked and the cunning. But we have had a series of such schemes, almost once every five years, from 1951 till 1997.
A plausible explanation for not going for the jugular immediately but offering the olive branch is that any adversarial proceeding is time-consuming and expensive. There is also the distinct possibility of the government losing at least half of the cases, if not more, despite the claim of fool-proof assimilation of information, owing mainly to the legal sophistries the legal eagles can invent with consummate ease.
A voluntary scheme, on the other hand, is likely to meet with greater and immediate success, with compromise being its leitmotif.
But to the fiscal purists and the honest tax-payers these alibis are not going to wash or assuage the feeling of hurt. A voluntary scheme that treats crooks with kid gloves definitely smacks of governmental ineptitude and capitulation to powerful industrial lobbies.
The power lobby of industrialists wangled for themselves a huge tax concession last year — 15 per cent tax on dividend brought into India declared by foreign companies abroad.
This was to pre-empt an incipient move contained in the Direct Tax Code (DTC) draft to carry the war to the evaders' camp.
The industrial lobby obviously sued for peace and settled for a soft tax. Even the current move of amnesty seems to be the outcome of extensive and intensive lobbying — sources of funds abroad should not be questioned and names not made public, in return for investment in the infrastructure sectors.
Will I-T Dept go after them?
One difference between the scheme on the anvil and earlier such schemes is that, this time round, the I-T Department seems to have built up a strong dossier on the tax-evaders seeking the safety of cooler foreign climes. It remains to be seen whether it guns for the recalcitrant among them.
Reports are that the olive branch would only be extended to them for a limited period, after which the government would go after them.
For good measure, one can count on the scheme to contain the usual admonition — last opportunity to return to the path of rectitude. The Wanchoo Committee of yore pointed out the farce of such admonition, given the fact that the same persons blithely participated in successive schemes, caring two hoots for the earlier admonitions.
The government would have won the battle but not the war if the same were to happen this time too. To pre-empt this farce from repeating itself and to impart seriousness and solemnity to the earlier admonitions, there must be another admonition — those who participated in any of the earlier amnesty schemes would not qualify for the current scheme!
One hopes these elementary precautions are taken while launching the scheme and the government goes for the jugular of those who have not come clean and about whom it has authentic information.
(The author is a Delhi-based chartered accountant. >blfeedback@thehindu.co.in )