Taxmen are suffering demonetisation, tracing black money that much harder
People entrusted with the task of checking tax evasion are having a tough time. Even in ordinary times our taxmen struggle to collect dues from citizens, but demonetisation is proving to be in a different ball game altogether.
They can't ensure cent per cent compliance anyway (with the sanctioned strength they can't even dream of achieving that). And even if they decide to go after the high-net-worth individuals and have a cut-off limit, they are not disclosing the task is gargantuan. To trace the money back to its origin, illegal origin that is, officials will have to sift through tens of lakhs of bank deposits between November and December 2016.
First up on their radar would be large deposits of demonetised currency, which happened without submission of proper identification papers. Many of these deposits would have happened in the Jan Dhan accounts.
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| Large deposits of demonetised currency happened without submission of proper identification papers. (Photo: Twitter/@sudarsansand) |
If a deposit is large enough vis-a-vis the account holder's income, then he or she is given 10 days to explain the source before calling them in for questioning.
It is usually not that simple as investigators have to sift through online and offline transaction trails, and search premises. Such procedures could take weeks, if not months. Till date, the IT department have reportedly identified Rs 80 crore in undisclosed income and seized Rs 7.5 crore (in cash).
Not too encouraging and a modest beginning at best. Around 5 per cent people pays income tax in our country and around five times the number manages to evade entirely.
Tax evasion is an area where we can claim to be world beaters and it does not help that the hopelessly outgunned tax department usually manages to go through between 1.5 per cent and 2 per cent of the roughly Rs 4 crore tax returns filed yearly.
Post-demonetisation figures show that more than a crore bank accounts have received cash deposits over and above the threshold of Rs 2 lakh. Among these, there are more than one-and-a-half lakh accounts that have deposits of over Rs 1 crore each.
The taxmen are aiming to complete investigation in these accounts on a priority, probably to send across a message.
The taxmen face a lot of odds — lack of office space, laptops and most importantly morale, mainly due to complicated promotion procedures.
According to the sanctioned strength of the I-T department, there are 7,294 assessment officers up to the additional commissioner level, which includes 4,204 I-T officers. The additional commissioners and joint commissioners handle about 30-40 quality cases a year, while the I-T officers assess about 100-150 smaller cases annually.
In other words, the I-T department can properly look into anything around 7 lakh cases annually. Small numbers as 7 lakh constitutes about 1 per cent of the total I-T assessees and 0.2 per cent to 0.3 per cent of the total PAN card holders. Any increase in volume of cases would impact quality of assessment.
That may be a reason why many hawala operators, one section against whom demonetisation was targetted, were confident that they will recover their money ultimately.
The roots of the hawala operator sometimes reach well into the circle of the sleuths themselves, as some operators claim. Corruption within the system will remain an issue unless procedures are made simpler and we look at the issue of paying taxes as our duty.
Meanwhile, the government would do well to invest in technology to track transactions.
Big Data Analytics can be an effective monitoring tool. Sensors in cash counting machines can track money coming into banks. These sensors will generate huge amount of real-time data on cash inflow and outflow, origin and destination etc.
This data can be analysed to seek out suspicious transactions, improve detection and surveillance on circulating cash and ultimately prevent financial frauds.