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The Business Interview/N K Singh

Tax amnesty scheme: Western India is not doing as well as Southern India

N K Singh is the all powerful revenue secretary in the finance ministry. The man best known for overseeing P Chidambaram’s controversial VDIS scheme. A scheme that many sections of the media have already written off as a failure. But is it? Is it actually a failure? Singh says No. In fact, he is even happy with the collections, the number of disclosures. Though he refuses to quote figures, Singh is confident that the scheme will meet its targets. So that he, too, will have the same 100 per cent peace of mind that his campaign is currently offering India’s habitual tax offenders. Excerpts from an interview with Pritish Nandy:

Why is everyone writing off the VDIS scheme as a terrible failure? What has gone wrong in your opinion, apart from the terrible advertising campaign?

Nothing. Though, I agree, the campaign could have been better.

In fact, contrary to what some people are spreading, the VDIS is doing quite well. In terms of the total number of declarations, in terms of the total number of challans, in terms of the volume of declarations, the number of declarants, the areas, the segments of society from where the declarations have come, the geographical spread of the declarations, and the total quantum of tax collected so far. Based on the multiplicity of all these (factors), the VDIS has been successful so far and I hope that its momentum will continue for the balance part of the period for which the VDIS was declared.

Have you been crunching numbers along the way, to see where you have met with your targets, where you have failed?

Yes, we have obviously been looking at numbers…

I mean in terms of specific detailing. Regional recoveries. Broad averages to show where the money is coming from, who are paying, paying for what kind of hidden wealth, how much are they paying in terms of effective percentages…

Yes, we have all the data. But the figures are not closed as yet. And I am not going to give you any numbers, Pritish. Not as yet. However, as I have said earlier, Western India is not doing as well as, say, Southern India is. This perhaps has something to do with timing and sequencing. Because both in terms of the potential of Western India as well as the opportunities it provides, I would have expected a higher level of response from Ahmedabad and Bombay. We should see some of that happening now. Now that the festive season is over.

After all, different areas have different cultural sensitivities.

What are the kind of hidden assets that are being declared under the VDIS today?

Well, various kinds of assets are being declared. Cash, jewellery. Undervaluation of investments. Frankly, these are classic things, which we were in fact expecting would be declared.

Are there some declarations that go beyond your classical model? Some oddities, some curiosities, some surprises?

Well, yes. I had not expected that silver would become such a big story. As far as Calcutta was concerned. I think silver became a big story because ingenious tax accountants tried to persuade declarants that if they declared silver they could buy peace of mind at much lower than 30 per cent. We rectified these misgivings by making it very clear that they are free to declare silver but they will be charged at the current market price of silver. Except in those cases where they have incontrovertible evidence that the silver was in existence at the time they claim. So I think we plugged that one…

What would you consider as incontrovertible evidence in this case?

Well, I would say a will where some member of the family has left behind the silver. Or a voucher from some reputed jeweller who has credibility. Or an affidavit where he (the declarant) takes the risk on himself. Where, if he is found to have filed a false affidavit, he takes the consequences for it.

As you know, under the VDIS, as a rule, once you make a declaration the department is not going behind the declaration. But in the case of silver, given the peculiarities of the asset, to some extent one is asking for proof -- which is more than a mere declaration.

Have you had many people declaring assets overseas?

No, not as yet. I do not see that movement in a manner that is in any way significant. Maybe they are waiting for a little while more. But I would have expected it to be more, given the fact that the Reserve Bank has permitted them to retain one immovable property abroad and has even permitted them to declare their shares abroad, having given them immunity under FERA. I would have expected to see more declarants than we have got so far. But I expect that to also gather momentum. However, let me reassure you that overall I am quite satisfied with the manner in which the VDIS is proceeding and the results we have achieved so far.

Did you ever consider the possibility of withdrawing some of the cases against tax evasions and FERA violations, now that the regulations themselves are being substantially watered down? Why don’t you left off minor violations — by putting them through VDIS — and avoid expensive time and litigation? What stops you from allowing petty offenders in your net to declare their violations under VDIS, pay off their taxes and close the chapter?

Pardon?

In cases where there are impending investigations going on, where minor offences have been committed under the existing tax and FERA laws, why don’t you close the chapter by allowing these people — guilty or otherwise — to declare their alleged violation under VDIS and save your department time, effort, money in pursuing prosecution?

There is no thinking whatever on these lines. In fact, there was no thinking whatever on these lines. No, we will not reconsider such cases because they do not come under VDIS.

But wouldn’t that save you a lot of effort and critical manhours? Expensive litigation too…

But that would vitiate the voluntary nature of the scheme.

Maybe you can consider it after the VDIS is over? After all, many of these are minor commercial violations, not crime crimes… And once the structural reforms are in place and the economy has opened up, these may (frankly) no longer look like crimes at all.

Well, the FERA act itself is in the process of undergoing change through public debate. It will be altered by another kind of scheme. With the money laundering bill which is also on the anvil. But at this stage, we do not want to do this…

But if the objective is to clean up the act, to clean up the way people have been doing business till now, does it not make sense to go the whole hog and give all people — guilty or not guilty of financial misdemeanour -- a final opportunity to set things right? For themselves, for India.

But this is a voluntary declaration scheme and those cases do not constitute voluntary declaration. So there is no thinking whatever in that direction. People who want to declare their hidden wealth must do so on their own, voluntarily. Otherwise, they will have to face the consequences. That is the message, straight and simple.

Do you think you have sold the message convincingly?

The final outcome will reveal how successful we have been in doing so.

Interview