Indian  Tax  Laws Lack Teeth

Tax crimes, money laundering and other financial crimes have posed  the great threat to the strategic, political and economic interests of both developed and developing countries. The launderers and criminals  undermine citizens’ confidence in their governments’ ability to get taxpayers to pay their taxes and may deprive governments of revenues needed for sustainable development. A general perception is prevalent these days that corruption is quintessential for survival of any business, trade or commercial activities.

These activities are thriving in the present global scenario of secrecy, inadequate legal frameworks and arbitrary policies formations in relation to the tax regulations, poor enforcement, and weak inter-departmental coherence. The offence including money laundering, corruption or other economic crimes typically constitutes a tax crime, which is not being taken very seriously in India. Even the smuggling activities have been held bailable by virtue of a recent Supreme Court judgment viz. Omprakash Vs. Union of India. This very fact shows that the Indian tax laws lack teeth. The govt. could have come up with the new bill in spite of crying wolf by resorting to the misinterpretation of old weaker law. 

The statistics in relation to the prosecution in such tax matters are pathetic. On 16th May 2012, the then finance minister of India Shri Pranab Mukherji bragged in parliament whilst presenting paper on black money (pls. refer page 47 at http://finmin.nic.in/reports/WhitePaper_BlackMoney 2012.pdf)

"7.15 Although sparingly used, the department has utilized these provisions successfully to enhance tax compliance, with a success rate of about 48 per cent convictions or fiscal compounding in the last six years, one of the highest amongst all law enforcement agencies in India.

The data in the said report reveals that in last 7 years, only 1485 prosecution cases were filed by Income tax dept. and only 123 persons were convicted out of such cases. Even in this minuscule number of cases, settlement or compounding formed the major part as a consequence of so called action on black money, whereby tax evaders were given the benefit of compounding. Who'll believe that there were only 1485 cases of income tax evasions in last 7 years in country like India, where IT dept. thought it appropriate to prosecute the evaders. And the conviction rate speaks voluminous about the seriousness of the department on such a sensitive issue. Therefore, it can be easily make out that huge talks of action on black money constitute the lip service only.

In recent past, we've witnessed the pressure on the honest investigating officers of Enforcement directorate. They're being harassed and their investigational records become the part of idle pads of red tapism. Justice is not seen anywhere in such cases. we're happy with eyewash like presenting white paper on black money and getting diverted from real issues. The ace investigating agencies like Enforcement Directorate, Central Bureau of Investigation, Central Board of Direct taxes and Central Board of Excise and Customs lack the teeth to take earnest action on the white collared criminals. It is unfortunate that in such scenario, the country's tax evasion is bound to grow exponentially and the law enforcement agencies will be busy in political persecutions only. 

Who doesn't know the cash dealings in real estate sales but no one is bothered to look into it. It is extremely difficult for a home seeker to find a home according to his budget. Even in the realm of global recession, Indian real estate market has shown unusual steep hike. This issue must be a cause of concern for lawmakers, if they find time for people at large. Rich is becoming richer and poor is becoming poorer. The situation is catastrophic and would be resulted in increase of economic crimes and white collared criminals. Public awareness may exert some pressure on the Govt. but the poor public is also busy in arranging their bread, clothing and shelter.

To counter these activities, the govt. requires to create more stringent laws, acquire political will to enforce the laws, greater transparency, more strategic intelligence gathering avenues and improved efforts to harness the capacity of different government agencies to work together to detect, deter and prosecute these crimes. A transformation in whole of government's approach is required to tackle the gruesome problem of financial crimes.