Indian Finance Minister Issues Warning Over Rising Tax Evasion

by Mary Swire, Tax-News.com, Hong Kong

26 April 2002

Indian Finance Minister, Yashwant Sinha warned this week that tax evasion on both a personal and corporate level is increasing in the country, and that confidence in the tax system has been seriously eroded as a result.

In a statement read in his absence at a two day meeting of Income Tax Department Director Generals and Commissioners, Mr Sinha noted that the number of Indian citizens and organisations with taxable income greatly exceeds the number of income tax returns filed, and urged the assembled tax chiefs to show greater resolve in order to restore confidence in the country's tax regime.

Although the Finance Minister was not in attendance at the two day seminar, he was represented by Revenue Secretary S. Narayan. Mr Narayan announced that in the view of the Finance Department, a crackdown on tax evasion would be most effectively acheieved by compiling a database of business and other large-scale transactions, in order to provide a more complete picture of the economic situation in India.

The Revenue Secretary explained to delegates that the initiative would need to be highly targeted, and that officials in certain areas should concentrate principally on specific types of transaction. Share transactions in Mumbai were given as one example.

Mr Narayan also revealed that the Indian authorities are now in the final stages of establishing a Financial Intelligence Unit to deal with economic offenses. 'We are in the process of finalising the terms and conditions of the FIU,' he announced.

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