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Follow the Big Brother for once
Unlike other nations, India’s income tax laws don’t deal with all aspects of tax evasion and thus allow evaders to dodge the laws quite easily. Also, it’s time to make the penalties more extreme
30/04/2012

February 24, 2012: 20 years of money laundering of worth more than Rs.13 million finally ended up in only a day-long detention and a fine of Rs.3 lakh. A special CBI court held the elderly couple, S. P. Goel and his wife Beena Goel, guilty of forgery under the Prevention of Corruption Act, and asked them to keep standing in the court till the end of its day’s proceedings. The monetary fine imposed on them was not even 10% of the money that they swindled. This acted more as publicity for the couple rather than punishment. This one case reflects the multi-faceted problems in Indian tax Laws. Such incidents may seem inefficaciously hilarious but also are resounding slaps on civil society.

For the uninitiated, India still considers tax evasion as a civil offence and not a criminal offence. Most developed countries have drafted stringent rules against tax evasion and have brought them under the ambit of criminal offence. In the US, under section 7201 of the IRS Code, an individual can be fined up to $1,00,000 and/or can be imprisoned for nearly five years. The country has strict money laundering laws and considers tax evasions (via illegal activities like gambling, drugs and others) as part of money laundering. China has provisions of even awarding death penalties to individuals accused of tax evasions. The two laws that UK adopts to plug in almost all loopholes of tax evasion are Money Laundering Regulations 2007 and the Proceeds of Crime Act 2002 (allows confiscation of the proceeds from crime & is a vital part of money laundering legislation). The effectiveness of such stringent laws is evident from the fact that the number of cases recommended for prosecution by IRS in US has risen by 33% between 2009 and 2011. Interestingly, US also has an anonymous whistle-blower scheme, wherein the whistle-blower receives up to 30% of any recovery in case of credible information on tax cheats. Greece has recently proposed laws, which can empower their law machinery to jail people for non-payment of Income Tax above 75,000 euro & Value Added Tax above 150,000 euros. Similarly, in Switzerland, evasion invites legal punishment followed by a fine of 33-300% of the amount evaded.

India’s money laundering laws fall way behind on world standards. The Minister of State for Finance S. S. Palanimanickam stated, “The top 100 tax defaulters owe a whopping Rs.1.41 lakh crore to the exchequer.” Such figures will continue to remain high until the authorities start arresting individuals on tax evasion. The Income Tax Act of 1961 under section 276C states that it can punish an individual with rigorous imprisonment ranging from three months to seven years along with a fine. Precisely, money laundering cases are being handled by I-T department under The Prevention of Money-Laundering Act, 2002 which merely prescribes financial institutions to maintain details about the clients, which can be further accessed by the I-T director anytime. In marked contrast, money laundering in UK is dealt under the purview of Terrorism Act 2000, Crime and Security Act 2001 and Serious Organised Crime & Police Act 2005.

The current Income Tax laws need to be made more stringent, so that they can encompass all the attributes of tax evasion and also make specific provisions to include tax evasion attempts as criminal offences, at least for some clear cases of tax evasion where there has been a wilful attempt to dodge the tax implication. Once the IT Department starts arresting such evaders, is when Indians might get strongly motivated to be legal!

By:- Sray Agarwal
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