Rahul Garg is the executive director for tax and regulatory services at PricewaterhouseCoopers India. He talks about the country's tax problems and what the government should be doing as a remedy.
How serious is the problem of tax evasion in India?
The parallel economy accounts for 40 per cent of the country's GDP, according to government estimates. Private estimates say it could be as much as 50 per cent of the GDP. This issue needs the urgent attention of law enforcement agencies.
Should tax evasion be made a criminal offence?
A stringent law is already in place - wilful tax evasion is punishable by up to seven years of rigorous imprisonment … Even if someone is found guilty of abetment in a case of tax evasion, he can be severely punished under the current law. Making new laws will not help; implementing existing laws with sincerity will.
How difficult is it to trace "black money" overseas?
Most transactions involving black money are so sophisticated that it becomes difficult to trace using conventional methods. If someone transfers cash to a Swiss bank account and uses it to buy property in Bermuda, it requires sophisticated methods to find the money trail. Tracking funds and bringing them back then depends on laws prevailing in those countries and the level of co-operation they extend to India.
So how can India effectively deal with this issue?
A lot will change if India makes it mandatory for all citizens to engage in financial transactions through banking channels only. Tax authorities need to efficiently reach out to citizens to ensure voluntary compliance.
* Anuj Chopra