Black money: FinMin sets up panel on 'voluntary compliance'

Black money: FinMin sets up panel on 'voluntary compliance' 

Amid the growing clamour to crack down on generation of black money, the Finance Ministry has instituted a study group to improve "voluntary compliance" by suggesting appropriate measures to motivate tax evaders to disclose their unaccounted funds.

The study, which will be conducted by economic and tax experts, is also aimed at stopping "commoditisation of tax avoidance schemes".

The latest study comes in the backdrop of Finance Minister Pranab Mukherjee's statement that two groups have been constituted to look into different aspects of black money, including a proposed amnesty scheme to unearth unaccounted wealth.

As per the statement of the proposal put forward by the Income Tax Department, "Complexity and innovation in business structures, new financial products, a large number of taxpayers, growth in international trade supported by rapid expansion of e-commerce, commoditisation of tax avoidance schemes are some of the factors leading to increased compliance risk for the tax administration."

It may not be possible for the Income Tax Department to address these risk factors through the traditional tools based on verification and enforcement action alone, the proposal added.

"Tax compliance costs impose a burden on the taxpayers. If the amount is a big percentage of the tax payable, it deters small and medium taxpayers from being a part of the tax system," it said.

As such, "The challenge before the I-T Department is to ascertain the extent of compliance cost for different categories of taxpayers and develop focused programmes to reduce the compliance costs for improving voluntary compliance," the statement said.

"The study group will strategise to increase direct tax collections and suggest measures to curb tax evasion effectively in the changing business scenario, which includes curbing generation of black money," a senior Finance Ministry official said.