October 19, 2016
According to the latest reports, as many as 52 nations have launched tax amnesties in recent years in an attempt to reclaim billions of pounds in lost revenue from tax evaders. The schemes, which have been held in countries including Indonesia, Germany and Spain have encouraged those who have avoided the authorities so far to hand over their undisclosed assets and incomes.
India is the latest country to launch an amnesty which has drawn in as much as $9.5bn in unpaid taxes. It’s being lauded as an ‘unqualified success’ at tackling the long standing and robust underground economy which sees huge sums avoid taxation partly because of India’s heavy reliance on cash transactions. They’re seen as a way of life in India and have contributed hugely to the country’s financial struggles.
Narendra Modi, the Indian Prime Minister, listed tackling tax evasion as one of his main goals when he came into office and from June this year, the government ran highly visible campaigns, encouraging citizens to use a four-month window to declare previously undisclosed assets and incomes in exchange for complete immunity from prosecution as well as anonymity. That is, as long as they paid 45% in taxes and penalties.
The amnesties were launched at a local level, even to the extent of visiting individual towns and villages across the enormous country. Hasmukh Adhia, India’s revenue secretary, commented, “We conducted a series of town-hall meetings all over the country […] All the top official as well as local-level tax commissioners attended. People had a lot of doubts about the scheme but we assured them of the secrecy aspect.”
As mentioned, the amnesty has been enormously successful and has been taken advantage of by a range of people. For example, a group of Mumbai street vendors are said to have contributed a staggering $7.5m while Naresh Agrawal, a real estate developer from Gujarat declared the equivalent of $6m. Agrawal spoke about the increasingly tight taxation system, “The rules have become much more stringent now. If you get caught using black money to strike a real estate deal, you have to pay 100% tax and penalties. No builder wants to take that risk. Earlier you were always nervous of getting caught. Now that I have disclosed everything, I can sleep easier.”
However, while the scheme has been successful in some respects, it also has its critics. Only 3% of India’s 1.2bn population pay income tax, but less than 65,000 people put themselves forward during the amnesty which led Economist Arun Kumar to calculate that India has an undisclosed wealth of around $1.35tn. The government has reported that the raised revenue will fund public welfare programmes so it’s essentially putting the money back into the country, however much more will need to be done to pin down the major players that have still managed to avoid punishment. While the amnesty may be seen as a success in some quarters, India has a long way to go to tackle its underground economy.
While we can’t offer you an amnesty to declare your unpaid earnings, we can help you remain on the right side of the law wherever you’re working around the world. Speak to our specialist team to find out what we can do for you.
CLICK HERE to live chat with one of our expert staff.
And why not SIGN UP to be part of our community?