For instance, the VIDS will not be advertised through the government's sleepy Department of Audio Visual Publicity. Instead, the country's largest agency HTA Will handle mass media, and another TNC, Ogilvy & Mather, will handle the direct marketing part. The VIDS even has a PR agency pushing its cause-- HTA's sister concern IPAN. Though Finance Ministry officials are tight-lipped about the total budget for the six-month-long exercise (the scheme opens on July 1 and closes on December 31), advertising sources put it at Rs 30 crore.
While formulating the Budget, Chidambaram and Revenue Secretary N.K. Singh had toyed with the idea of running the amnesty scheme as a bond issue, on the lines of the successful India Development Bonds (IDB) offer in 1991. Under that scheme, the tax evader brought in foreign exchange he had stashed away abroad and bought tea, which the government redeemed with interest five years later in rupees. "This time round, we decided to target a different class of people, says an official. "People who may have their black money in illiquid forms, like jewellery, or fixed or benami assets. For instance, we expect to get a lot of NRIs who bought property in India under, say, their third cousin's name. And a lot of non-metro people.
The VDIS, North Block sources claim, is novel in other significant ways too. "The crucial difference," elaborates a top official, "is that when you declare a hidden asset under this scheme, you will be taxed on the face value of the asset at the time you acquired it, and you will be taxed at today's tax rates, which are lower than those prevailing at the time of the transaction. So the VDIS is the best of both worlds, you pay on a lower value and at a lower rate."
But if the carrot's so pink and crunchy, the stick too needs to be big and spiky. "Yes," admits the bureaucrat, "the stick question kept coming up when the advertising agencies were making their presentations. The scheme can succeed only if we can communicate to the people that the government will be extremely harsh on you if you haven't availed of the VIDS and are found to have undeclared wealth." The Income Tax Department is beefing up its systems.
But most importantly, the government needs to get people to trust it. The questionuppermost in the Indian tax evader's mind is: if he declares his black wealth, will he come under increased surveillance by the tax authorities in subsequent years? There are even rumours that the Income Tax Department is setting up a special cell to monitor people and companies who take up the VIDS offer. Finance Ministry officials firmly deny this, and cite the example of the IDB scheme. "We have been very successful in protecting the identities of those who bought IDBS. We have managed to block the media, and even Parliament questions. We are not interested in right and wrong here, we're interested in the revenues."
Which, the government claims, have been doing pretty well till now. In April and May, personal income tax and corporate tax collections were higher than the government's projections. "Our experiment with direct taxes--lowering tax rates to achieve greater compliance and higher collections--is heading for success," says Revenue Secretary Singh. As far as excise goes, the collections in April-May are a shade lower (Rs 6,064 crore) than the figures for the corresponding period last year (Rs 6,209 crore). The Finance Ministry claims it's not too worried about this.
What it could be worried about really is customs duty. Import growth is still extremely sluggish--2 per cent in dollar terms, while the country needs a minimum 15 per cent growth to meet the Finance Ministry's indirect tax targets. But officials claim that with greater focus on compliance, they will be able to meet the revenue targets.
Whatever comes in through the VDIS will be over and above these targets. And how much the scheme will manage to put in the government's coffers will depend on a five-letter word: trust, trust that the government will not renege on its promise to forget your name after you have declared your hidden assets.
