The raids reminiscent of VP raid raj
Narendra Modi has vowed to crack down on tax avoidance. Figures published last month for the first time since 2000 showed just how few of India’s top earners pay tax. Billions of dollars in unpaid taxes deprive the Indian government of revenues that could be spent on changing lives. The news had an immediate effect. Lamborghini rolled out its new $580,000 supercar this month, but local millionaires tempted to buy the flashy convertible could hit a bump in the road thanks to the taxman.
Figures published last month for the first time since 2000 showed just how few of India’s top earners pay tax. Only six people earning over 500 million rupees ($7.4 million) filed returns in 2012-13.
The numbers are hard to square with the estimated 2,100 ultra-wealthy Indians whose net worth exceeds $50 million, according to the Credit Suisse Global Wealth Report, or a Forbes list that found 84 billionaires.
New Delhi’s glitziest hotels host week-long, multi-million dollar weddings, drawing thousands of guests, with parties awash with Veuve Clicquot and DJs flown in from Ibiza.
But now the government’s top taxman is looking to join the dots, by cross-checking income declarations with data from luxury car dealerships — as well as property registers, fixed bank deposits and stock market transactions.
“The people in the higher bracket are not paying the correct amount of taxes. This is a fact,” revenue secretary Hasmukh Adhia told AFP of the new initiative.
“We need to do something about it. We are taking a lot of enforcement action.”
But rounding up tax is difficult when dodging it is practically a national sport, from small-time landlords who request rent in cash to large-scale money laundering via state lotteries.
“The people in India who are not declaring their tax are not the kind of people that will buy a very flashy car and drive in front of the entire city displaying their wealth.”
Across all levels of society, India’s taxpayers are startlingly few, with only around 2.5 percent of its 1.2 billion population filing returns — largely because the so-called unorganised sector employs so many people.
At least 500 Indians including Bollywood celebrities, business tycoons and an ex-cricketer were named in the recent Panama Papers investigation as using tax havens — a practice not, in itself, illegal.
But the revelations prompted Modi, who has made tackling “black money” a tenet of his two years in office, to order an investigation.
And this month the government closed a major loophole in Mauritius, where a decades-old treaty enabled people to route cash via the island without paying capital gains tax.
Agricultural income is not taxed, which has long been a sensitive issue because of an oppressive colonial practice of taxing farmers heavily.
The government says it is a start — and that greater transparency will kick-start a culture of shame, rather than begrudging admiration, for those who keep their money out of the taxman’s hands.