Govt’s Income Declaration Scheme fails to catch the big fish
04 Oct 2016
The Income Declaration Scheme-2016, touted as the most successful effort by the government in unearthing unaccounted income and wealth, seems to be a hollow claim considering that the scheme managed to mop up Rs65,250 crore from as many as 64,275 disclosures – just around Rs1 crore as accounted wealth from these high networth tax evaders.
The tax gain from the Income Declaration Scheme (IDS) to the government of around Rs29,000 crore, based on undisclosed income of R65,250 crore, is of course significantly higher than expected, but that is only scratching the surface, it seems.
For one thing, most of these declarations came from rural and semi-urban areas and this leaves the urban black money holdings relatively untouched – and this could be several times higher.
Also, the IDS scheme that ended on 30 September also failed to attract the parallel economy that thrives on imported and homemade fake money.
While the scheme is a success in terms of the money it has netted the government, it hasn't made much of a dent when it comes to unearthing black money.
Most would admit the tax and penalty collections from the Income Declaration Scheme (IDS) of around R29,000 crore, based on undisclosed income of R65,250 crore, are significantly higher than expected.
Together with the Rs56,378 crore of income the government has managed to unearth via investigations in the last two years, the total undisclosed income this government has unearthed so far comes to around Rs1,20,000 crore
While the scheme is a success in terms of the money it has netted the government, it hasn't made much of a dent when it comes to unearthing black money.
At under 0.5 per cent of GDP, the income disclosed is a pittance in comparison with even the most conservative estimate that puts the size of the black economy at 30 per cent of GDP.
Instead of voluntary disclosures, the government would have unearthed more by direct tracking of large sums of black money which is being spent on buying property and luxury goods.
Also, it may be noted that the real disclosures came after taxmen's letters to tax evaders giving details of their big-ticket expenditure. IDS, clearly, hasn't netted the big fish.
