Recently, the Niti Aayog released an 'ease of doing business' report that stated that starting a business in India continues to be fraught with problems and bottlenecks. Last year, the World Bank's 'Ease of Doing Business Ranking' had placed India at 130 out of 150 countries. The Union government was quick to distance itself from both the reports.
The claims by the Centre that it is the most business-friendly ever took a hit with a draconian letter (dated Aug 16, 2017) being issued by the Financial Intelligence Unit of the Ministry of Finance to banks — with the subject line: 'Forwarding of list of tax defaulters who are untraceable/have no assets for recovery'. An excel sheet of the so-called 'defaulters' was attached with the letter.
The banks were urged to share with FIU whether the listed entities were maintaining any account with them, details of such accounts and whether the said accounts were alive or dormant. The deadline for responses from the banks was fixed for August 30, 2017.
The Department of Revenue's specialised bank transaction monitoring wing has received two sets of data from the Income tax department. These two lists have been categorised under 'have no assets' and 'not traceable'. About 816 assessees are listed under the head of 'no assets' whereas 204 assessees are 'not traceable'.
The Employees Provident Fund Organisation (EPFO) has been included in the tax defaulters' list. Interestingly, well-known companies like Vodafone International Holdings B.V., Nokia India PVT Ltd, Deccan Chronicle Holdings Limited and Essar Technology Limited have appeared in the list under 'No Assets'. Similarly, Abhijit Enterprises, which is still active and filed its 2016 IT returns, has also been counted as 'not traceable'.
According to Ministry of Finance sources, this list has been prepared on the basis of assessing officers' inputs. Significantly, out of the 816 entities as many as 538 are companies that are tagged under 'no assets'.
"Most in the business community are seeing such a step as a constraint on the idea of ease of doing business," a merchant chambers official told DNA, not wishing to be named
Sudhir Kapadia, Partner and National Tax Leader with EY, said, "Post demonetisation, the IT department has got a lot of data which is being analysed and inquiries undertaken. But the government must be careful not to make too many discretionary powers in legislation, which can be very intrusive. A legitimate follow up by the IT department cannot be grudged."
A senior lawyer, who did not want to be quoted, said, "Government should smoothen the process so that tax sleuths do not hound honest, tax-paying companies."
Tax officials have been using all the weapons at their disposal to meet steep targets set by the government. These include attachment of operational bank accounts and assets of partners and directors of defaulter companies and even hounding the legal heirs of deceased tax-defaulters. But even after all this, real revenue collection has not risen greatly, a government official admitted.
The Centre has been facing huge challenges on the tax recovery front for several years. According to the latest report (No.2, 2017) of the Comptroller and Auditor General (CAG), in 2015-16 the tax department could collect only 8.44 per cent (Rs 22,089 crore) of Rs.2.61 lakh crore of certified demand. It means 91.56 per cent certified demand remained pending. Tax arrears demand swelled from Rs 8.27 lakh crore to Rs 9.29 lakh crore till March 31, 2016. CBDT fixed a collection target of Rs 53,981 crore, but could collect only Rs 29,811 crore till February 2017.
The tax department has searched and surveyed thousands of cases in the last quarter of the last financial year but failed to meet targets.
LETTER BOMB
- MoF letter seen by corporates as symbol of ‘unease’ of doing business
- How can Vodafone, Nokia, even EPFO have no assets, ask experts
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