Officials plug holes as they prepare to take on defaulters and bring 2.7 crore people into the tax net.

By Shefali Rekhi

Inspired by the success of the Voluntary Disclosure of Income Scheme (VDIS), the crack team -- led by Revenue Secretary N.K. Singh, Central Board of Direct Taxes (CBDT) Chairman Ravi Kant and Member (investigation) A.K. Batabyal -- is going all out to make the second attempt at tax compliance -- the widening of the tax base -- as big a success.

In February, Hindustan Thompson Associates and Ogilvy & Mather will unleash the second phase of their tax-compliance campaign. The motto this time: Pay Your Tax -- Hold Your Head High. Income Tax (IT) Department officials are also reaching your doorstep. They are either mailing "friendly" reminders. Or landing up unannounced to scrutinise books of accounts. The drive is intense in prominent notified cities -- Delhi, Mumbai, Chennai, Calcutta, Ahmedabad, Bangalore, Pune, Hyderabad, Jaipur, Faridabad, Gurgaon and Ghaziabad -- where people have to file returns, irrespective of whether they are tax-payers or not. Those who did not declare their income in 1996-97 have till February 28 this year to do so, with the 4 per cent penal interest being waived. Says Kant: "The efforts are aimed at building a climate for tax compliance. It is an investment for the future. In due course, it will also increase income for the government."

The war against those trying to escape the tax dragnet hotted up about three months ago because revenue collection was below expectation. Between April and October last year, the total collection (excise, customs and direct taxes) was Rs 63,104 crore, an increase of just 0.43 per cent against the target of 17.09 per cent.

The matter-of-fact approach of the it Department can to traced back to June last year, when Finance Minister P. Chidambaram met 3,000 senior it officials and told them, "At the end of the year, I am going to hold you responsible." His wish list was daunting: VDIS must work, tax collections must be on target, and above all, the tax-paying population must go up by a third of the existing base of 1.35 crore each year. That means doubling the tax net to cover 2.7 crore assessees by March 2000. The officials had squirmed, but Chidambaram had been relentless: "Do you want me to believe that there are only 12,000 people with incomes above Rs 10 lakh?" Pause. "To my mind, that many would be in south Delhi itself."

The echo of his words never died out, reinforcing the department's new-found mission. Beginning July, all offices were wired with fax machines; over a hundred new vehicles reached it doors; and new posts for 77 commissioner were created. Says a chief commissioner: "It implied that the finance minister would mean business in accountability."

Zonal heads are now working overtime to ensure revenue inflows. In Chennai, seven "survey" teams are fanning out to different trade districts to detect the evaders; every tax cop has a target to meet. To "nab" 50-odd farmhouses which were renting out premises for film-shoots but not declaring the income, the Chennai commissioner has started a special tax-deducted-at-source scheme, in which the tax is deducted even before the rent reaches the landlord.

Mumbai has discovered that it has 72,000 companies, of which only 40,000 are paying tax. Queries have been mailed to the rest. As an incentive, the chief commissioner will shortly publish a list of the highest tax-paying citizens to accord them special social status. In Hyderabad, Telugu films are being screened, while Delhi is preaching the goodness of paying taxes through Times FM and targeting private coaching centres and farmhouse owners. Says S.C. Parija, one of Delhi's chief commissioners: "Our basic philosophy is to make evasion seem costlier by increasing the probability of detection. Once this is backed by severe and certain punishment, results will be automatic."

The drive is not limited to metros. Though the it Act's new Section 139 (1) proviso, detailing the criteria, (which is smartly worded, for it makes not only owners but also residents and tenants eligible) applies only to the notified cities, commissioners in the remaining cities are also trying to coax income-tax declarations. In Agra, the tax cops nailed an owner of several shops who was trying to slip away by asserting that his income was being ploughed back into the shops. He eventually disclosed an income of Rs 30 crore. Down south, NRIs are being sent letters quizzing them about investments in India.

Given the past record on VDIS, the tax base may increase. Says Narayan K. Jain, a consultant in Calcutta:"In recent months, the inclination towards tax compliance has dramatically increased, with the younger generation prevailing upon their parents to comply." The issue is also whether tax collections will increase. The pace till December-end was sluggish, showing a 4 per cent increase (individual it collections are 1 per cent below target).

In the current year, the Government does not seem unduly concerned as its kitty is overflowing with the Rs 10,000 crore that poured in with the VDIS disclosures. Next year is another issue. Having cracked the whip, Chidambaram seems prepared to wait for the results, irrespective of whether he remains minister or not.

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