As slow growth taxes the economy, heavy hitters who have evaded taxes have come under the eagle eye of Finance Minister P Chidambaram. Following his instructions to income tax officials to address an estimated backlog of Rs 4 lakh crore of corporate tax, a massive crackdown has been unleashed on all major tax evaders who owe the government upwards of Rs 500 crore. The finance minister hopes to collect over Rs 6,50,000 crore as direct taxes in the financial year 2013-14 including corporate tax. In May, Chidambaram hinted that the government is mining data to enable it to trap tax evaders in the finance ministry’s net.
For the first financial quarter of 2013, the government has mined the data of 41 private and public sector enterprises who have to pay Rs 70,000 crore to the treasury—almost 17 per cent of the estimated corporate tax collection for 2013-14. With the impending general elections, governments cannot raise new taxes and the recovery of money from big tax evaders is the best hope to tackle the fiscal and current account deficit.
According to Finance Ministry sources, the data has been mined and compiled up to March 2013 and a fresh list is likely to be out in the first week of October, which will provide the details of tax collection for the last five months from the 41 cases under scrutiny. The Income Tax Directorate of Recovery, responsible for taking action in pending dues is pursuing the matter with field authorities. Chidambaram had said the method the ministry follows is to mine the data first, issue notices and then gently push evaders into filing returns and paying taxes. “This is the correct way to go about it,” Chidambaram said in June.
The Finance Ministry is also addressing the challenges of meeting human resources, technology and time to improve tax collection in order to deal with tax evasion.