Traders hide accounts in ‘cloud’ to evade tax in Thiruvananthapuram

The lack of a cyber investigation division, they say, is hampering their efforts to unearth tax fraud in the digital age.

Traders who routinely under-report their sales to evade value added tax (VAT) have been storing their “true” books of account in cloud computing data storage centres to fox tax inspectors, Kerala Commercial Taxes Department investigators say.

The lack of a cyber investigation division, they say, is hampering their efforts to unearth tax fraud in the digital age. The cloud servers are located mostly in jurisdictions outside the country’s law.

Understaffed too

Furthermore, the department is understaffed and is struggling to meet the duty collection targets set by the cash-strapped State government. It has stepped up conventional inspection of shops and premises of service providers to detect tax evasion, which often results in volatile confrontations between inspectors and traders.

Officials say that intelligence-based inspections of shops in Thiruvananthapuram alone till September this year led to the registration of 197 cases of VAT evasion and recovery of Rs.67.84 crore, a 40 per cent increase compared to last year. However, this is just a fraction of the actual VAT evasion in the district. The figures for other districts were not immediately known.

Vehicle, mobile phone and computer accessories, surgical equipment, furniture, timber, glass and plywood products, and tiles and sports goods are among the commodities on which tax is evaded the most. Unaccounted purchase and sale of the goods fuelled the large scale VAT evasion in Kerala. Delinquent traders often stock their wares in bulk on “undeclared premises,” issued no bill to customers, and under-reported their sales.

Investigators have also warned against cheap foreign made goods flooding the market, chiefly toys, utensils, hot plates, umbrellas, and stationery. The commodities were imported in bulk through air and sea ports, often by understating the quantity of goods in the bill of entry to pay lower import duty. The products were then retailed without bill. High-end establishments which offered personal services, such as costly hairdressing salons and beauty parlours, are also under the scrutiny of tax inspectors.