Sucheta Dalal :Tax evasion: The farce continues
Sucheta Dalal

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Tax evasion: The farce continues  

July 5, 2011

Who says the government wants to go after black money stashed abroad?

Sucheta Dalal

The fact that at least 18 Indians have nearly Rs44 crore stashed in Liechtenstein, a tiny European tax haven, was known and reported by the media way back in early 2008. Their names were among the 1,400 that a bank official sold to tax authorities in Germany and other countries. While countries like the US, the UK, Australia, Germany and Italy immediately initiated action, India has been moving at a snail’s pace. In the three intervening years, mounting pressure from activists and opposition parties to bring back tax-evaded money to India forced the government to sign agreements with dozens of countries to share information on tax evasion. Finally, on 9th June, a daily published the 18 names with exact details of cash held in Liechtenstein banks and the tax penalty that has been computed by tax officials. Does it mean that this paltry tax-evaded money would now boost our tax coffers?

It is unclear. One media report says that the CBDT (Central Board of Direct Taxes) has submitted an affidavit in the Supreme Court saying: “18 Indians had deposited Rs24.26 crore as tax on Rs43.83 crore held in the bank accounts.” Another says that the process of recovering money with penalty has been initiated in 17 of the 18 cases. But this, too, may not be accurate.

Vishwabandhu Gupta, a retired income-tax commissioner based in Delhi, tells us that the tax authorities are still reluctant to take any action. He says that the very fact of stashing money in a tax haven is proof of an intention to ‘wilfully evade taxes in India’. This does not require a long-drawn litigation, if the authorities are determined to collect tax. Under Section 276 (C) of the Income-Tax Act, a person who ‘wilfully attempts’ to evade tax, penalty or interest chargeable, then ‘without prejudice to any penalty’ that may be imposed under the Act, is punishable with rigorous imprisonment of not less than six months, extending to seven years. This harsh penalty is applicable even when tax evaded exceeds just Rs1 lakh.

The Income-Tax Department has no qualms arm-twisting honest taxpayers, even on TDS (tax deduction at source) issues arising out of its own confused drafting. Yet, it drags its feet over return of black money from tax havens and collection of interest and penalty. The government simply does not want money coming back from tax havens.

(This article was first published in the edition of Moneylife magazine dated 30 June 2011 which was available on the stands on 16 June 2011.)

-- Sucheta Dalal