The chance given by the Narendra Modi government to black money holders through the Income Declaration Scheme (IDS) which ended on 30 September seems to have been partially spurned or gamed. Or both.
Earlier this month, we learnt that two declarants – Mahesh Shah of Ahmedabad, and a four-member family of Sayeds from Mumbai – had made humongous disclosures of Rs 63,680 crore and Rs 2 lakh crore respectively, when they did not seem to have the means to generate that kind of money. The tax department seems to have rejected these claims post-facto after waiting till 30 November, the deadline for the first instalment, to check the colour of their money.
Now, The Times of India reports that even the remaining declarants do not appear to have paid up fully. Collections of 25 per cent of the taxes due have amounted to a mere Rs 6,700 crore. This means that the total declarations that may be valid could come down to Rs 55,000 crore, much lower than the Rs 67,000-and-off crore announced when the scheme closed. Under the scheme, 45 per cent of the amount declared was the total tax payable in instalments.
In Shah’s case, the taxmen were cautious, and Mint reports that he was asked to deposit at least Rs 50 crore in taxes to prove his bonafides, but when he didn’t, his declaration was cancelled. Shah disappeared for a brief while and then resurfaced in a TV studio earlier this month, from where the taxmen got him arrested. Shah claims he had made the declaration on behalf of others, including politicians and businessmen. The question is whether he picked the Rs 13,680 crore figure out of thin air on the assumption that he could collect hefty commissions from whoever was willing to let him be the frontman for their declarations, or whether he was informally hired to do this job.
The questions that arise, now that even some of the accepted declarants have failed to pay up, are the following:
One, are black money holders trying to game the system even when given an opportunity to come clean by using subterfuges and frontmen for their operations? Or are commission agents trying to make a fast buck using their links with the taxmen? Or are all three parties – corrupt tax officials, middlemen and crooked businessmen – in this game together? The last angle needs investigation.
Two, are suspect parties trying to discredit the IDS scheme by putting up bogus frontmen to make high declarations and then letting the government stew in embarrassment once these turn out to be bogus?
Three, is the lower collection in IDS-1 the result of demonetisation? If the declarants had hoped to pay the taxes by laundering more black cash, demonetisation could have spiked their guns by eroding this stock of black wealth. If this is really the case, demonetisation has clearly impacted the crooks.
Four, can the new IDS – the Pradhan Mantri Garib Kalyan Yojana – also face the same fate, though this money will come from deposits actually made and not from mere declarations?
The Modi government would be well-advised to scrutinise declarations made under IDS-2 in advance before putting out numbers. It cannot afford another serious downgrading of its calculations when black money holders seem to be able to stay one step ahead of the taxman all the time. This is evident from the stacks of new currency notes turning up with unexpected parties during tax raids.
In executing the new IDS, the government needs to act on the assumption that there is no honour among thieves. They will try to game the system even while apparently trying to come clean.
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