Seeking to tackle the issue of black money in a proactive manner, the Finance Ministry has set up a study group to improve voluntary compliance and address the issue of revenue leakage by suggesting appropriate measures to motivate tax evaders to disclose their unaccounted income.

The decision comes in the backdrop of Finance Minister Pranab Mukherjee asserting last week that two groups had been constituted to look into different aspects of tackling black money, including a proposed amnesty scheme to unearth unaccounted wealth.

As per the statement of the proposal put forward by the Income Tax Department, Complexity and innovation in business structures, new financial products, a large number of taxpayers, growth in international trade supported by rapid expansion of e-commerce, and commoditisation of tax avoidance schemes are some of the factors leading to increased compliance risk for the tax administration.

The proposal added: It may not be possible for the Income Tax Department to address these risk factors through the traditional tools based on verification and enforcement action alone.

It said the challenge before the department was to ascertain the extent of compliance costs for different categories of taxpayers and develop focused programmes to reduce the compliance costs for improving voluntary compliance.

Curbing tax evasion

The Ministry's study group will devise ways to increase direct tax collections and suggest measures to curb tax evasion effectively in the changing business scenario, which includes curbing the generation of black money.

It will undertake a four-pronged approach to understand well compliance issues from the perspective of taxpayers.

The group is expected to make recommendations with respect to the operational decision-making process on the basis of views expressed by the affected parties, as well as facilitate participation in the tax system by all segments of taxable citizens.

It will also study the barriers to compliance as an ongoing programme and the compliance costs with respect to different categories of taxpayers on a periodic basis.

Revenue leakage

The I-T Department will study the extent of revenue leakage with clear identification of the activities and factors responsible for its growth, which will help it to optimise revenue mobilisation.