labels: Shivshankar Verma, Expectations
Letter to the finance minister: Unorthodox fund raising proposals for the finance minister news
04 July 2009

For the finance minister who is facing serious challenges on the fiscal front, a few suggestions to raise enough funds, which will last the rest of his term. By Shivshanker Verma

"Dear Mr. Mukherjee,

"I am not about to give you yet another list of budget demands. You must have received many such lists, including one from my colleague Vivek Sharma (See: Forget the fiscal deficit, pamper us!), earlier this week. In any case, it is too late and I am sure you have already finalised all your budget proposals for the current year.

"I am more interested in helping you solve a problem which all finance ministers faces. You never seem to have enough money to finance the huge demands made on you. Since you are in a very rough spot as far as your finances go, I am glad to submit a few proposals which have the potential to solve most of your problems for the next several years.

"It is a while since the country last heard about amnesty schemes for tax evaders and maybe it is time for a new scheme. The rationale for an amnesty scheme is very simple; there is a lot of unaccounted wealth in our system. If you can pry out even a portion of it, the rest of the taxpayers can be given a tax holiday.

"Most amnesty schemes don't fully succeed because they are blind offers. The government, which makes the offer, doesn't know much about the tax evaders or the unaccounted wealth they have. All the past schemes depended almost entirely on the tax evaders voluntarily coming forward to confess. If they didn't have a change of heart and come clean, there was no credible threat of retribution. Such schemes will not deliver the desired results. You shouldn't just repeat them.

"Instead, form a large team of your best tax officers. Recruit some to handle the routine tasks at your tax offices and place the more experienced officers in this team. Ask them to do an extensive survey of the likely tax evaders across the country and prepare rough estimates of their wealth. The team should be provided sufficient infrastructure and other resources to collect information from past tax records, property registers, banks, insurance companies and so on. Don't hurry this process; let your team work on this for the next two years. Even if the team is only able to extract information about some of them, you should create the impression that details about every tax evader is in the bag.

"Then, you will be in a position to make an offer not many can refuse. I would recommend an offer of 50 per cent or nothing. That is, come clean and pay 50 per cent of the undeclared wealth or risk losing everything. Most will take the threat seriously if they are convinced that you have all the details and you will go after them if they don't pay up.

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Letter to the finance minister: Unorthodox fund raising proposals for the finance minister