KOCHI: The number of people coming forward to pay their taxes is going up despite tax sleuths often stumbling upon the systematic methods devised by celebrities in evading taxes. The raids conducted by the IT sleuths in the premises of singer-actor Rimy Tomy along with few other non-resident businesspersons in different parts of Kerala two days ago have revealed the propensity of celebrities in the state to indulge in tax evasion.
Despite the aberration on the part of the celebrities and the super rich the number of people coming forward to pay tax has gone up along with the amount collected. The time series data released by the Central Board of Direct Taxes shows that direct tax collection in Kerala totalled Rs 11,909.69 cr in the financial year 2014-15 compared with Rs 3,719.8 cr in the financial year in 2008-09.
The sharp increase in the amount collected in a five-year span is a clear indication of the increase in the number of people willing to pay taxes, says Sanu Joseph, a chartered accountant based in Kochi. “The increase in the salary drawn by the people and the improvement in the efficiency of the system to trace the sources of income has contributed to the increase in tax collection. In the case of salaried persons it is now almost impossible to conceal the income”, Mr. Joseph said. Apart from the salaried people professionals and other self-employed people are also now willing to pay their taxes.
“The income tax return document has become an essential document for many transactions. It also provide a kind of respectability to a citizen”, he pointed out.
According to Mr. Joseph most professionals now prefer to pay their taxes to avoid hassles connected with the Income Tax bureaucracy. “The culture of tax compliance in the country will improve tremendously if the people have enough proof of the tax money being used for the greater benefit of the people”, he said.
In countries having efficient tax buoyancy there are visible signs of the tax money being deployed for providing public services. “The record in our country in this regard needed to improve substantially”, he added.
General feeling amongst the people is that the tax collected by the government is often lost in the quagmire of an inefficient public delivery system marked by political corruption and nepotism. “People prone to tax evasion or unwilling to pay their tax often take this as an alibi for their action”, he added.
Sources in IT department say that tax evaders in the state are using the hawla route as one of the important instrument for channeling their wealth. “The large number of non-resident population, especially working in countries in the West Asia region provides a good cover for such kind of activities”, said an IT official. The gulf-based hawala syndicates are used by ordinary folks as well as rich and powerful persons for their transactions, he said.
“We can often see agents of hawala syndicates in the state collecting foreign currency by paying a premium of 10-15 per cent above the official exchange rate. Such collection agents visible in the street corners of all major cities and towns in the state are part of the network involved in tax evasion”, he added.
Tax evasion ends with fine
The punishment for tax evasion normally ends with a fine and in most cases the life cycle of a tax evasion case is around 5-6 years, according to chartered accountants. The income tax officials often impose a very heavy demand after detection of a tax evasion case, says Lukose Joseph, a chartered accountant in Kochi. “There are several layers of appellate authorities before the evasion is finally established and a fine imposed”, he said.
In most cases the issues will be closed before the Settlement Committee of the IT department, he added. According to Mr. Joseph in rare cases the matter will be taken to the courts and then it would linger for years. The fine and penalty depends on the gravity of the cases and the amount of the evasion. The penalty is calculated based on the interest that would have been accrued to the amount involved in the evasion with a fine.
The tax laws are very clear on the provision of taxing the income earned abroad. A resident Indian has to pay tax as per the law for the income earned in any other country. The concealment of income earned abroad by a resident citizen is a punishable offence.
Most chartered accountants are of the opinion that the time-frame for ending the cases connected with tax evasion cannot be reduced due to the process. The aggrieved person needed to be given sufficient opportunity to prove that the wealth amassed by him is through a legitimate and per the existing laws in the country.
