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Kathmandu Thursday February 14, 2002 Falgun 02, 2058.
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After VDIS
The deadline extended by the Ministry of Finance
for the voluntary disclosure of income scheme (VDIS) expired the other day. The Inland
Revenue Department (IRD) has managed to collect more than 650 million rupees since the
government announced VDIS in the current fiscal year budget last July. Earlier, IRD had
collected 440 million rupees, rather short of the target. Private sector entrepreneurs
represented by Chambers of Commerce and Industry criticized the tax dragnet. Nevertheless,
IRD has enlisted more than 3,000 new taxpayers. IRD was able to collect an additional 155
million rupees during the extension period alone. This is encouraging. The government has
also identified potential tax evaders. VDIS was introduced with the objective of dragging
defaulters into the tax net and, at the same time, helping meet government expenditure.
Likely tax defaulters may include corrupt politicians, bureaucrats, doctors, lawyers, real
estate operators, businessmen, etc.
The Income Tax Act gives tax officials every
right to dig out information and build up cases against tax defaulters. IRD officials have
said there are still more than 1,000 tax payers who have failed to disclose their sources
of income even during extension of VDIS. Who are these tax defaulters? Are they corrupt
politicians, doctors, business leaders or ordinary citizens who may have fallen prey to a
crude legal system? Past experience shows that the government has always taken action
against petty businessmen and ordinary citizens rather than corrupt leaders who have
amassed wealth at cost to the public exchequer. A 1990 cabinet decision stated that
"all ministers including parliamentarians whether in or out of power have to disclose
their sources of income within 15 days." Unfortunately, most of those politicians
have yet to disclose their sources of income. The government has not yet brought to light
how many such corrupt politicians disclosed their property under VDIS recently. Neither
did IRD come up with specific measures against corrupt political leaders before it
constituted the Income Fixing Committee (IFC). This is indicative of a crude nexus that
has developed between businessmen, politicians and bureaucrats.
IFC can no longer remain silent about
politicians or business leaders who have evaded taxes for years. IFC can neither seek
explanations from such tax defaulters, nor should it ask for details about their property
before it acts against them. Such defaulters have developed a tendency to evade taxes and
this has undermined the government’s revenue mobilisation. Perhaps, it would not have
had to opt for VDIS had such tax evaders realised that they too need to contribute to the
development of this country. Tax investigation officials have every right to raid business
premises, houses and warehouses before they seek explanations about an individual’s
property. Now that the government has declared war on tax defaulters it should really go
after the fat cats who have managed to keep out of reach. It should also show similar
resolve in enforcing VAT, which has not been much in the news these days. For while VDIS
may have made many feel the tax bite like never before, it is in VAT that the lion’s
share of potential revenue lies. Any crusade relating to VDIS should not be at the cost of
diverting manpower and energies away from VAT on which the government had once staked its
reputation. |
