Pay 45% tax, move your black to white: Govt's new plan
February, 18th 2011
This Budget, Finance Minister Pranab Mukherjee may announce a last and final call for all tax evaders who have stashed away black money here or abroad, to come clean after paying tax plus a penalty, collectively amounting to 45 per cent.
The Central Board of Direct Taxes has worked out an immunity not amnesty scheme where people can voluntarily disclose their hidden earnings without being prosecuted.
However, there would be no respite from tax compliance. Tax would be levied at normal structure wherein the real tax rate comes to about 23 per cent, and there would be a 100 per cent penalty on it, said government officials.
But for easy administration and low compliance cost, the unaccounted income would be taxed at a flat 45 per cent, they added.
The public perception is that money parked abroad should be brought back into the country. This would be the easiest way as taking legal recourse for confiscation is a litigious and time-consuming route, said the officials.
Therefore, the voluntary disclosure of income proposal is primarily aimed at bringing money stashed offshore but onshore may also be included.
Officials said that the scheme has the consent of the minister, but it is yet to get political approval.
They clarified that it would not be an amnesty scheme where tax is not levied on the undisclosed income as was the case under National Housing Bank (Voluntary Deposits) Scheme, India Development Bonds Scheme and Remittances in Foreign Exchange (Immunities) Scheme in 1991.
The scheme would incorporate a clause asking immunity seekers to furnish details of their foreign accounts as is being done by the US Internal Revenue Service, said the officials.
There are negatives that weigh against the scheme. While it would be unfair to persons who are voluntarily tax compliant, it could turn counter-productive with people expecting similar schemes to be floated in the future.
People then take further risk in disclosure and it also shifts the tax liability with immunity seekers paying lump sum during VDIS so that future years they escape taxes, said the officials.
The last VDIS in 1997 generated Rs 9,750 crore as tax with 4.75 lakh people disclosing Rs 33,290 crores as unaccounted income.
The new scheme, coming more than 13 years after the last one, would be a final chance to evaders to bring back the wealth stashed away in banks of Switzerland, Mauritius, Liechtenstein, etc. before the Income Tax Department gets cracking.
Officials clarified that the proposal had not stemmed out of the multi-disciplinary committee appointed by Mukherjee last month to estimate the quantum of black money as well as the feasibility of introducing an immunity scheme.