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Chasing Evaders: Outreach or Over-reach?

Chasing Evaders: Outreach or Over-reach?

If India's tax- to-GDP ratio of 17.7 per cent has to get anywhere near developed countries' 25-35-36 per cent, those who should pay taxes must be brought under the tax net. But that's easier said than done

Rajeev Dubey, Editor, Business Today Rajeev Dubey, Editor, Business Today

Finance Secretary Ajay Bhushan Pandey, who retired recently, has a cheeky way to describe the tax department's new-found prowess - it's ability to put two-and-two together in identifying tax evaders, digitally, electronically and with precision. "All major transactions are being shown in 26AS. How much stocks you purchased, how much mutual funds, which property you purchased or sold, how much is your fixed deposit, how much money have you remitted abroad, so that even by mistake he does not forget to include those transactions in the tax returns," says Pandey with a straight face.

For years, tax authorities operated in silos. Even within the finance ministry, information sharing was case to case and occasional. Information matching from other transactions such as land, share market and mutual funds and large value expenses such as automobiles, hospitality, etc was non-existent. Tax evaders made maximum use of this information asymmetry, never disclosing the full extent of transactions to all authorities.

But all that has changed in the past two years. If India's tax- to-GDP ratio of 17.7 per cent has to get anywhere near developed countries' 25-35-36 per cent, those who should pay taxes must be brought under the tax net. But that's easier said than done.

Two data intelligence and analytics-based projects - the Directorate General of Analytics and Risk Management (DGARM), an arm of the Central Board of Indirect Taxes and Customs and 'Project Insight' by the Central Board of Direct Taxes - have turned the tables. As information began flowing regularly between income tax, GST, customs, excise, stock regulators, property registrars and the likes, it's got harder and harder to evade taxes.

But there is a flipside. The new-found clout has given corrupt officials a free hand to slap arbitrary notices and demands, hound the tax payers and even resort to violence. In the cover story this issue, Dipak Mondal examines where the tax department's outreach stops and over-reach begins - a balance that is far from being achieved.

Meanwhile, under pressure from spiralling domestic prices of petrol and diesel, India's oil minister Dharmendra Pradhan has hit out at oil producing nations for colluding to raise crude prices, hurting India which imports 85 per cent of its crude. But the problem lies at home as much as abroad. In a shrinking economy, the Centre and states have milked fuel by ramping up taxes so much that domestic prices of petrol crossed Rs 100 a litre in 30 districts in the country. Now they are riding a tiger they can't seem to get off. What are the options? Read on page 36.

The clouds of uncertainty over businesses due to the vagaries of Covid-19 refuse to settle. The worse affected the sector, the darker are the clouds. For instance, aviation. This time last year, India's largest airline IndiGo was staring at a dark future with all 259 aircraft grounded. Fixed costs began eating into profits-and reserves-and the airline was burning Rs 40 crore of cash a day. A net profit of Rs 698 crore in the first three quarters of the previous year had already turned into a Rs 4,659-crore hole in the balance sheet by Q3 of FY21. Now, international travel restrictions, rising aviation turbine fuel prices and permanent loss of some business are working as headwinds. Read Manu Kaushik's account of how IndiGo fought back with an even higher market share after unlockdown.