Big brother is watching

With individual and corporate income tax-collections needing to grow at 20 per cent annually over the next four years, and excise at 24 (compared to a much lower 12 and 14 per cent actual growth in the last three years, respectively), the government's tax targets are certainly optimistic.

Yet, you have to give the income-tax authorities credit for their approach being absolutely spot on in identifying information technology (IT) as the sure-fire means to help income-tax collections.

Take service tax, which is expected to be the real growth sector, both in terms of growth as well as in actual collections.

Thanks to the new rules, any company that pays service tax (to a courier company, for instance) to anyone, must mention the service tax number of the provider in its annual returns.

The catch: to get a service tax number, the service provider must have a PAN number! So, immediately, the tax net gets wider.

So far, however, this may not be too much of a help since the tax department has not insisted on e-filing of service tax returns.

But once this is done, as is expected, it will immediately be possible for the tax department to figure out whether a courier company which is charging another company a certain amount every year is reflecting this in its tax statements.

In fact, once e-filing is made mandatory, it will not be possible to put in fake service tax numbers, or state that the number is not available.

As soon as a company files its service tax returns, the computer will automatically do a search on the PAN number/service tax number field, and simply reject the returns that have incorrect/incomplete data.

E-filing, as a matter of fact, has already been made compulsory for TDS filing in the six metros, and companies that do not fill in PAN numbers of employees whose taxes have been deducted at source will probably find their returns being summarily rejected.

A similar exercise using IT is also under way in the country's stock markets, for precisely the same purpose of allowing easier tracking.

According to the plan, over a period of a year or two, all individuals dealing in the stock markets, as brokers or as principals, are to be issued a unique MAPIN number, and this is to be quoted in all their transactions.

By the end of this month, all intermediaries registered with Sebi, and their officials/relatives who actually make transactions, will be fingerprinted and given unique MAPIN numbers. Over the next year or so, this will be extended to all market participants.

So, the next time there's a bear raid, or a bull run, the authorities will be able to pinpoint who bought and sold which shares at what price. And probably be able to immediately feed them into the taxman's computer as well, to check if all the money is accounted for.

So far, anything more than a rudimentary audit trail has not been possible in the market without such an online information system. So the next time you buy a share, remember big brother may actually be watching you.