Quo Vadis, VDIS?

The deadline for the voluntary disclosure of income scheme (VDIS) announced by Finance Minister Dr Ram Sharan Mahat in the current fiscal year budget expired the other day. The government managed to collect 360 million rupees in taxes during the whole scheme period, falling short of its official target by more than half. The objective of VDIS was to net tax defaulters and help meet regular government expenditures. Many people have gone from rags to riches since the restoration of democracy and such people tend to neither disclose their property and sources of income nor pay income tax. A majority of them continue to default on taxes. Had the government taken stringent measures against the defaulters, it would not now have had to opt for an ad hoc approach like VDIS, nor would national economic performance and social development have been so poor.

When announcing its current fiscal budget, the government had urged tax defaulters to voluntarily disclose their income and wealth. Following that VDIS was announced. This is the second VDIS announced within five years. Under an earlier VDIS, the government had collected 15 million something rupees. The VDIS which just concluded underlined that tax defaulters had to pay at the rate of 10 percent on disclosed wealth even if such wealth was amassed illegally, or else face in-depth investigations which may lead to confiscation of properties. Private sector entrepreneurs represented by chambers of commerce and industry have criticized the tax drag net. But the defaulters also include politicians, doctors, lawyers, builders and promoters, bureaucrats and corrupt officials, real estate operators, etc. There are also a few questions that remain. How has the government prepared the list of tax defaulters? Have corrupt political leaders and government officials been included in the list? Corrupt politicians and government officials who have amassed wealth illegally are still in power. Is the government really prepared to take action against them under VDIS?

Tax evasion in this country has been rampant as a result of poor policy and ineffective implementation. A 1990 cabinet decision stated clearly that "all ministers whether in or out of power have to disclose their sources of wealth within 15 days." Of the present forty-one ministers in the government, only two have submitted statements on their sources of wealth. The rest including the Prime Minister seem to remain blissfully ignorant of such legal provisions though many among them own assets disproportionate to their sources of income. This speaks volumes about the commitment of our political leaders to the country’s development. There is then the question of how honestly politicians use the tax payers’ money for the development of this country. Meanwhile a crude nexus has developed between politicians, businessmen and bureaucrats to thwart any move against tax evasion. It is high time the government recognized this and took action against those at fault. There are finally two other issues that the tax administration should confront. One is the lack of clarity about the whole VDIS scheme, with many people not certain how it applies to them individually, if at all. The second problem is the fear of tax gauging by greedy officials who might prey on the naivety of the general public. The tax people should have done a better job of explaining the provisions to the people and winning their trust.