As money from VDISstarts flowing in, misgivings about the scheme give way to admiration
WHEN Finance Minister P. Chidambaram announced his second budget on February 28, the cynics had a good laugh: to balance the fiscal deficit,Chidambaram had announced a disclosure scheme, where black money would be converted into white at a flat tax rate of 30 per cent. Today, barely seven weeks before the scheme closes on December 31, Chidambaram and his revenue department are having the last laugh: the scheme actually seems to be working.
Informally, the targeted amount was put at Rs 15,000 crore; that translates into a tax collection of Rs 4,500 crore. According to finance ministry mandarins, this figure is well on its way into government coffers. Approximately a third of the expected fig-ure—about Rs 1,500 crore—has already been collected. And as the scheme enters its last few weeks, the volume is expected to rise exponentially.
To counter the fear of victimisation, the Central Board of Direct Taxes (CBDT)—the apex body monitoring direct tax collections in the country—recently wrote to all state governments urging them to ensure that they did not prosecute any business house for evasion of sales tax, excise or stamp duty if it had made disclosures under the scheme.
VDIS, of course, is the simplest and most lenient such scheme ever offered in India. For those wanting to go in for the scheme, there will be no questions or clarifications asked, no hassles. Just disclose your unearned income, and keep 70 per cent. If you say you have 1 kg of silver and you bought it in 1960 for Rs 10,000 only, you pay just Rs 3,000 as tax and have a good night's sleep. A sweet carrot.
But the stick follows too. If the tax authorities find out later that the silver was not bought at all, and this was simply a route to convert your black money into white, then you're in for some trouble.
What could happen is that you would declare you sold the silver—that you never had—for Rs 1 lakh, and since you've paid the tax of Rs 3,000 on it, the money is all white. The IT people will then ask you—and this is in no way connected with VDIS—just one question: to whom did you sell the silver? IT sleuths would then contact the buyer and ask him questions. And if they find that he has done some 100 deals that translate into Rs 1 crore—thrice his annual turnover—then they would dig deeper. And keep digging until they track the whole circular deal right back to your bedroom.
Meanwhile, disclosures in the Andhra Pradesh commissionerate, which are reported to have crossed the Rs 500-crore mark, have caught the attention of senior revenue department officials. Chief commissioner Radha Krishnan is keeping his cards close to his chest. "It is confidential and I have nothing to comment on that," is all he is willing to say. But rumours have it that a senior Congress politician belonging to the state has disclosed Rs 80 crore.
That the Karnataka and Goa commissionerates are doing very well on the VDIS chart is confirmed by sources in the department, but the Rs 1,000 crore figure that has been reported in the press as total Bangalore declarations till October is being termed as highly exaggerated. The realistic figure of declarations till now: in excess of Rs 400 crore, of which Rs 120 crore would go into the government coffers. By the time the scheme closes, the collectorate would like that figure to swell to the targeted Rs 250 crore. "We are very much around our targets now and should meet it when the scheme closes," says an officer. "Even ordinary chartered accountants and advocates have brought in more than 25 declarations each." And the big ones in Bangalore have touched about 250 declarations.
"The declarations in Karnataka and Goa appear large because other parts of the country, particularly Maharashtra, have lagged behind," says one chartered accountant who has brought in the maximum of 250 declarations. "One major declaration in Mumbai can wipe out the entire declaration of Bangalore." According to him, his peers and advocates have been pushing their clients to go in for VDIS ever since the scheme was announced. "We tell them that this is a good opportunity to declare or they could face punitive action in the future. And people are willing to listen."
Disclosures in Mumbai—which give the income tax department two out of every five rupees it collects all over the country—have been a disappointment, say officials there. However, they don't have a clue on how the figure can be made to look more robust. Hard pressed to achieve a revenue target of Rs 2,000 crore, all that officials are willing to concede is that no major disclosures have been made so far—quite unlike what had been expected when the scheme had been launched.
The disclosures target for the West Bengal commissionerate was fixed at Rs 1,000 crore. Disclosures, at just Rs 100 crore so far, have been dismal. Officials there say that some persuasive-cum-punitive methods are on the cards and self-employed professionals are the ones who may have to face the heat.
But whatever the collections till the end of October—the first four months of the scheme, officials across the country appear confident that national targets will be achieved. They claim that they did not expect to collect much in these four months, and the fact that nationally, around one-third of the targeted figure has already been collected, is a very encouraging sign.Besides, North Block is maintaining intense pressure on all regional income tax offices. Chidambaram and revenue secretary N.K. Singh personally monitor collections and put the heat on laggards. The tone of the high-decibel advertising campaign is also likely to change now, from friendly reasoning to a more threatening posture.
Till now, the government has also managed to keep the identities of declarants strictly under wraps, an essential requirement for the success of any such scheme. The flip side: preparations are already being made for those who do not avail of VDIS benefits. Search and seizure operations as the country has never witnessed before are slated to take off from January 1998.