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Aiding tax evaders

A few senior members of the Indian Revenue Service fear that Union finance minister Mr Pranab Mukherjee may introduce in this Budget something akin to the Voluntary Disclosure of Income Scheme (VDIS). It may be done by reviving the Income Tax Settlement Scheme to help 2G scamsters and the like, especially those with money stashed away in foreign banks, so that they can disclose their income on condition of immunity from investigation by revenue Intelligence.

The retired revenue officials fear that tax evaders will enter into a pact with the Income Tax Settlement Commission (ITSC) so that the names of the assessees are kept secret. Chennai-based chartered accountant Mr MR Venkatesh said: “Over the years, the ITSC has degenerated thanks to overuse, abuse and misuse and has transformed itself into the first resort of all tax evaders. No wonder it’s now known as the Income Tax Settlement by Commission. A number of middlemen who go between the income tax department and the assessees have seen to it.”

Though Mr PC Chidambaram projects himself as the architect of VDIS as the finance minister of the United Front government during 1996-98, the initiative eventually proved vacuous. Former finance secretary Mr Ashok Jha, points out that the Indian government had launched five such schemes  since 1951, even if one does not factor in the demonetisation of high currency notes around 1946.

The Mumbai-based independent outfit, Research Unit for Political Economy, in an article its journal Aspects of India’s Economy, underscored what it felt was the impropriety of Mr Chidambaram discussing the VDIS with India’s business community which is notorious for hoarding black money. The UF government carried forward the tradition of bonhomie between the industrialists and I-T authorities. The article points out how during such interactions, industrialists “quite freely talk about their foreign hoards. This type of gathering opens up new vistas for the government. Perhaps in future… drug smugglers, mafia dons, murderers and so on can have ‘frank and open discussions’ with the FM on how they can serve the country”. The government’s “Dream Budget” from the mid-90s overlooked the National Institute of Public Finance and Policy’s findings on black money in 1985. The NIPFP, in reference to schemes such as VDIS, observed they “reduce whatever deterrent effect exists in the current provisions for penalty and prosecutions”.

But the credit goes to Mr Chidambaram for neutering the ITSC in what well-known economist Dr Amit Bhaduri, currently Emeritus Professor at Jawaharlal Nehru University describes as the “age of presentation”. A former I-T commissioner recalled how the ITSC was transformed into a “stinking body of corrupt officers and staff who danced to the tune of giant tax-evaders”. It remains to be seen what finance minister Mr Pranab Mukherjee comes up with