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Income -Tax department plans hi-tech measures to plug tax evasion
January, 17th 2011

The income tax department (ITD) is working on a strategy to identify "evasion prone sectors" of the Indian economy and the reasons behind tax avoidance, in order to plug tax leakage.

With this objective, the revenue authorities have proposed to constitute an expert group that will conduct a study on tax leakage and the measures to plug it.

The department is also vetting a proposal to set up a criminal investigation directorate, which will keep tabs on fund flow related to money laundering, narcotics, terror activities and will also develop business intelligence.

The ITD's Vision 2020 document states that the department intends to use innovative methods to supplement its traditional enforcement tools. The department has proposed "to ensure the integrity/ evidentiary value of digital data by following the best cyber forensic practices." The Vision 2020 document was released on January 5 by finance minister Pranab Mukherjee.

It spells out the vision, goals and challenges before the department.

The action plan of the Vision 2020 document proposes to upgrade current data mining and other initiatives for data warehousing solutions, in order to develop comprehensive business intelligence for just- in- time enforcement capability. There should be standard operating procedures for cyber forensic practices, including analysing and archiving digital data flow, the document states.

Further, the ITD wants to track all shady deals using the latest techniques of forensic/ phone interception and have a centralised data base, sources said. Business intelligence should be made available to the actual users on a real time basis, says the vision document.

The ITD is facing new challenges because of the proliferation of tax avoidance schemes and the complex structuring of transactions of multinational corporations. The document says that the challenges can be met by exchanging tax information at international fora and by setting up overseas units. The plan proposes the building of partnerships across government agencies to gather and share information and to work out uniform accounting/ reporting practices.

A conscious effort has to be made towards developing non- intrusive, targeted enforcement tools, it added.

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