The finance ministry expects to get tax revenue of Rs 4,500 crore from the voluntary disclosure scheme that is being launched next month. The Budget for the current year has not taken credit for any revenue under the scheme.
But the ministrys officials have projected this substantial sum as the likely earnings from the scheme, which runs through till the end of December.
At the current maximum rate of income tax of 30 per cent, this means the government expects disclosures of income to total Rs 15,000 crore. If this figure is reached, it will be the largest sum ever disclosed under such a scheme.
Ministry officials disclosed yesterday that in all their discussions, the point that has been repeatedly made to the government is that the scheme will succeed only if the stick is wielded before the carrot is held out. The indications are that the government is prepared to launch a large-scale round of raids to encourage more disclosures.
As for the carrots, ministry officials pointed out that the scheme has twin advantages, compared to earlier schemes. Assets acquired from the income that is disclosed will be valued at the original acquisition price, not their current market value. And second, the tax rate that applies will be the current 30 per cent, not the rate of tax that prevailed in the year when the income was originally earned.
Officials explained that the scheme is aimed at unearthing fixed assets that have been acquired from unreported income, apart from jewellery and assets abroad. Consequently, the disclosures will get immunity under both the Income Tax Act and the Foreign Exchange Regulation Act (Fera). However, assets acquired abroad will have to be brought back into the country within six months.
Asked if the disclosure of assets held in other peoples names (benami) will not attract the specific law against benami holdings, officials pointed out that no rules had been framed yet under the benami law, which is therefore not in force.
The disclosures will not, however, have immunity from the law on psychotropic drugs and the prevention of corruption.
In response to a question what guarantee the declarer would have against the public disclosure of what he had declared under the scheme, it was pointed out that there would have to be a measure of trust on the issue, and that the government had a good record on this count so far. For instance, the names of people who had made disclosures under earlier schemes had not been made available to Parliament, or to the courts.
Officials said they were not interested in questions of right and wrong, what they wanted was revenue.
Crackdown on EPCG misuse
The finance ministry is getting ready to crack down on the export promotion capital goods (EPCG) scheme on grounds of large-scale misuse. Imports under the scheme attract a concessional (or zero) duty in return for the promise of exports that are equal to five (or seven) times the imports.
If the ministry has its way, the EPCG scheme will go the way of Vabal, the value-based advance licence scheme that became the subject of controversy following allegations of flagrant misuse.
