Mumbai Matinee

Updated: Nov 6 2003, 05:30am hrs
It is well known that Mumbai, Indias premier metropolis, collects the biggest chunk of the countrys income-tax payments. But its tax arrears, amounting to a staggering Rs 29,000 crore, are as stunning as its collections. Does this mean that Mumbai is teeming with aggressive tax dodgers bold enough not to pay up the accumulated tax liabilities No such thing. The arrears only show that Indian enforcement agencies are clueless about dealing with financial crime inspite of a scam-ridden decade of excellent learning opportunities. They show that the tax authorities have made outlandish claims that they have little hope of recovering. As our reports show, the bulk of I-T arrears from the top 100 defaulters are pending since 1991 and they mostly comprise the Harshad Mehta family and others accused in the scam of 1992. Harshad Mehta, who has the biggest tax liability of Rs 5,137 crore, is no longer around. And his brothers, their wives and companies owned by them are collectively expected to cough up over Rs 15,000 crore. Most of this money is clearly irrecoverable. Even more preposterous are the claims against Hiten Dalal (Rs 2,026 crore), Abhay Narottam (Rs 3,573 crore) and S Ramaswamy (Rs 942 crore). Anecdotal reports and subsequent investigations suggest that none of these people ever made the sort of money that would justify the claims slapped on them by the income-tax department.

Having once made their outlandish demands, there is apparently no mechanism to admit exaggerated claims. The tragedy is that a country that comes with tax amnesty schemes for tax dodgers every few years does not dare to institute a workable settlement system, because the high level of corruption among its own officials will ensure its misuse. At the same time, tax evasion is so rampant, even among policymakers and politicians, that we do not have tough enforcement laws that sentence tax evaders to a term of rigorous imprisonment. Having said that, it is interesting to note that the bulk of arrears in the I-T list pertain to 1992. And only Ketan Parekh, the big bull of Scam 2000, figures on the list through substantial claims of a little under Rs 2,000 crore against two of his firms. Does this mean that the income-tax department found no major tax evaders among promoters of hundreds of vanishing companies, finance companies and plantation companies of the 1990s Or is it that the income-tax department is being more realistic in its claims