Tax evasion needs to be made a serious “criminal offence” to force foreign countries to reveal names and account details of Indians stashing illicit wealth abroad, the Special Investigation Team on black money has said.
While adding more teeth to India’s pursuit of black money kept abroad, this would also check generation of unaccounted-for wealth within the country, SIT Chairman M.B. Shah said.
At present, tax evasion is a civil offence in India and it is dealt under the Income Tax Act, 1961, while forex violations are dealt under the Foreign Exchange Management Act (FEMA). Both laws are civil in nature and do not have criminal proceedings attached as such.
“We have made a serious pitch for this. One reason is that, if tax crimes remain civil in nature, the foreign governments will not cooperate,” Mr. Shah said.
“If this is made a crime, then there is no difficulty and then they [foreign countries] are bound to reveal the names.”
The Supreme Court-constituted SIT, which has the former Supreme Court judges M.B. Shah and Arijit Pasayat as Chairman and Vice-Chairman, recently submitted its latest report on the black money menace, wherein it has disclosed tracing of Rs. 4,479 crore held by Indians in a Swiss bank and unaccounted-for wealth worth Rs. 14,958 crore within India.
The SIT has suggested making tax evasion of Rs. 50 lakh and above a “predicate offence,” saying this would enable easier investigation into tax evasion crimes under the stringent laws of money laundering as stipulated under the Prevention of Money Laundering Act.
Mr. Pasayat said there was a need to limit holding and transportation of cash and to check large-value “unreported” cash dealings that are rampant even at public places like shopping malls.
“The government needs to seriously examine the issue and take steps to make ‘tax crimes’ a predicate offence. To prevent any hardship to salaried or small taxpayers, a high threshold of tax evasion, say more than Rs. 50 lakh, could be considered a predicate offence,” the SIT has said.
In its second request, Mr. Shah said, the SIT also wanted specific regulations to check large-scale possession and transportation of cash.
Mr. Pasayat said: “A number of transactions are done while shopping in malls to the tune of Rs. 1 lakh to Rs. 2 lakh each. Once keeping of huge amount of unaccounted cash is checked, it will solve such problems,” he said. These measures will not only create criminal deterrence, but also “social deterrence,” he added.
The panel which has the heads or representatives of 11 agencies to assist Mr. Shah and Mr. Pasayat, also wants limits on holding of cash and currency notes. The SIT has also recommended making PAN mandatory for all cash and cheque transactions above Rs. 1 lakh and amendment of laws to provide for confiscation of domestic property of those with illicit assets abroad.
The SIT has also flagged existence of black money in mining, ponzi scheme and iron ore exports as well as money couriers, called ‘Angadias’, dealing in huge sums of money outside the banking system.
It also recommended establishment of a central KYC (Know Your Customer) registry to deal with the problem of multiple identities of an individual in financial transactions.