Traders take tax sleuths for a ride

This persistent stagnation in revenues, inexplicably, is coexisting with burgeoning foreign remittances and surging consumption.

This, economists say, is a theoretical impossibility. They suspect that such a situation has been made possible by traders who are using the “illusion of crisis” to evade taxes.

“Except for the fall in rubber prices, which cannot be said to affect the entire state by any stretch of imagination, there is nothing to indicate that the state is passing through a phase of recession. With the fall in the value of rupee, remittances have only gone up. In a state like ours, a good portion of this money goes into consumption. And still, if the growth in taxes is dull, this has to be viewed with suspicion,” said Jose Sebastian of Gulati Institute of Finance and Taxation.

Kerala is the top consuming state in the latest statistics brought out by the National Sample Survey Organisation.

“Though the latest NSSO survey related to the 2011-12 period, there is nothing to show that the trend could be even slightly reversed,” Mr Sebastian said. Taxes but are not showing a corresponding rise.

Mr Janardhanan, a former tax official who runs a consultancy, said that traders were eager to play victims. “They have used the general perception of a fiscal crisis to their benefit. They now attempt to con the tax sleuths by feigning sluggish sales,” he said.

“Tax officials take these traders at face value. But they don’t seem to reason why these shops are not shutting down if the business had been so poor for the last couple of years,” he said.

The tax machinery is not equipped either to deal with such evasion. It lags far behind traders who use state-of-the-art virtual facilities like cloud computing to keep their accounts.