Editorial

Time for the stick

| Updated on January 16, 2018 Published on October 02, 2016

With the IDS window over, the Centre must now go after defaulters

It must have come more as a relief than a sense of triumph for the Centre that its Income Declaration Scheme (IDS) resulted in 64,275 declarants owning up to an undeclared income of ₹65,250 crore. For a government that rode to power on an anti-corruption plank, including the promise of a strident stance on unaccounted money, the outcome of last year’s declaration scheme for foreign income was an embarrassment. All that the 90-day window in 2015 (July to September) could cough up was 638 declarations amounting to ₹4,147 crore, or a tax revenue of ₹2,488 crore. In comparison, the IDS declarations will translate into a tax revenue of about ₹30,000 crore at a rate of 45 per cent, including the penalty. After disbursal of the States’ share, the Centre will be left perhaps with ₹18,000 crore. The present mop-up is better than the 1997 Voluntary Disclosure of Income Scheme which resulted in 4.75 lakh declarants disclosing an income of ₹33,339 crore translating into a tax income of ₹9,584 crore. The per capita declaration in the case of the IDS works out to a little over ₹1 crore, against just ₹7,00,000 in the case of the VDIS. This means richer taxpayers have entered the tax net, an indication that they are unwilling to take the tax machinery for granted when high value transactions are PAN-based. Yet, it would seem that some of the estimated 2.36 lakh high networth individuals in India (those with a networth of over ₹6.5 crore or $1 million) are not paying their taxes. Only about 5,000 individuals paid tax amounting to ₹1-₹5 crore in 2012-13, the last year for which the Centre recently released detailed data. The number of taxpayers, at 1.25 crore in 2012-13, accounted for just 1 per cent of the population.

The fight against black money is impaired by the fact that its share in the economy remains a matter of conjecture. This is despite numerous reports having been prepared on the subject, including the latest joint effort by three economic think tanks, that was presented to the Government more than two years ago. Although the report is yet to be made public, it is believed to have assessed the size of the black economy at 75 per cent of GDP or about ₹90 lakh crore! Interestingly, estimates range from 10 per cent of GDP to 40 per cent. The IDS has made but a small dent on this.

Ferreting out black money is not an insuperable task. The revisiting of bilateral investment treaties, as part of a global crackdown on tax havens, will help. However, certain sectors are major culprits: elections, mining, real estate and bullion. While GST will clean up concealment in taxes and improve efficiencies, politics and realty cry for attention. With the carrot out of the way, it is time now for the Centre to wield the stick. That alone will dispel the impression that income declaration schemes are nothing more than periodic amnesty measures to bail out those who hoard unaccounted wealth.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on October 02, 2016
null
This article is closed for comments.
Please Email the Editor