NEW DELHI: Indian Prime Minister Narendra Modi has vowed to crack down on tax avoidance — notorious in India, especially among the super-rich — to tackle yawning inequality in the world’s second-most populous nation.
Figures published last month for the first time since 2000 showed just how few of India’s top earners pay tax. Only six people earning over 500 million rupees (US$7.42 million) filed tax returns in the 2012 to 2013 financial year.
The numbers are hard to square with the estimated 2,100 ultra-wealthy Indians whose net worth exceeds US$50 million, according to the Credit Suisse Global Wealth Report, or a Forbes list that found 84 billionaires.
“The people in the higher bracket are not paying the correct amount of taxes. This is a fact,” Indian Ministry of Finance’s Financial Services Secretary Hasmukh Adhia said. “We need to do something about it. We are taking a lot of enforcement action.”
Billions of dollars in unpaid taxes deprive the Indian government of revenues that could be spent on changing lives in a country where 270 million people survive on less than US$2 a day, according to the World Bank.
However, rounding up tax is difficult when dodging it is practically a national sport, from small-time landlords who request rent in cash to large-scale money laundering via state lotteries.
Across all levels of society, India’s taxpayers are startlingly few, with only about 2.5 percent of its 1.2 billion population filing returns — largely because the so-called unorganized sector employs so many people.
At least 500 Indians, including Bollywood celebrities, business tycoons and an ex-cricketer, were named in the recent Panama Papers investigation as using tax havens — a practice not, in itself, illegal.
However, the revelations prompted Modi, who has made tackling “black money” a tenet of his two years in office, to order an investigation.
Rules introduced this year make it mandatory to declare a unique taxpayer number when purchasing goods over 200,000 rupees and to pay 1 percent in tax when buying cars over 1 million rupees.
This month the government closed a major loophole in Mauritius, where a decades-old treaty enabled people to route cash via the island without paying capital gains tax.
Yet some of India’s wealthy are not obliged to pay income tax at all.
Agricultural income is not taxed, which has long been a sensitive issue because of an oppressive colonial practice of taxing farmers heavily.
