FE Editorial : The taxman cometh
The Financial Express: Dec 12 2012, 01:26 IST
Though finance minister P Chidambaram has been exhorting the taxman to get corporates to increase their tax compliance—each increase of 1 percentage point in the effective tax rate from the current 24.1% towards the nominal rate of 32.5% yields around Rs 15,000 crore—he has done well to turn the focus on the real evaders: high net worth individuals. To add punch to the stern warning issued to tax evaders by the revenue secretary, the taxman finally seems to be making some use of the massive amount of data he has been collecting over the years from credit card companies, jewellery shops, car dealerships, land record offices, and so on. While only 1.5 million of India’s 40 million taxpayers claim to have an annual income of over R1 million, the taxman’s data show that 1.6 million persons paid over R2 lakh in credit card bills in FY12, 1.2 million people bought or sold properties worth more than R30 lakh, 5.2 million bought mutual funds of more than R2 lakh or bonds of more than R5 lakh and around 3.4 million made cash deposits of more than R10 lakh in their bank accounts. In other words, a substantial proportion of persons having incomes of over R1 million are not declaring this to the taxman. Which is why, despite the way incomes have grown, personal income tax collections stubbornly remain at around 18% of total tax collections, a number that has remained unchanged for the last decade. The much-maligned corporate tax collections, on
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