The government may prosecute those accused of
evading taxes under the Prevention of Money Laundering Act (PMLA) as part of a
wide ranging crackdown on black money. Further, non-declaration of foreign bank
accounts and assets may also be made a criminal offence, according to people
who have been briefed on the thinking within the tax authorities and the finance
ministry.
Failure to pay income tax could become
prosecutable under anti-money laundering laws if the amount evaded exceeds Rs
50 lakh, according to a person aware of the deliberations.
Under laws currently in place, neglecting to
pay income tax is a compoundable offence, that is, offenders can end
proceedings by paying a penalty.
Failing to pay service tax, in certain
specific situations, and excise duty are criminal offences even now.
Such acts could be added to the list of
offences to which PMLA is applicable, known as 'predicate offences'.
The apex bodies in charge of direct and
indirect taxes, the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC), have held
initial consultations to identify offences and define a threshold of evasion
beyond which PMLA could be brought into play.
Some of these measures could be part of the
forthcoming Budget, some of the people cited earlier said. But a final decision
would be taken only after a detailed analysis of the possible impact of such
steps on the fragile investment sentiment which the Modi administration is
endeavouring to improve, said a government official privy to the development.
"There have been some discussions... We
are examining as to what could be adequate threshold for these offences,"
said the official.
Concealment of income, non-disclosure of
foreign assets including bank accounts, giving false evidence and non-deposit
of tax deducted at source are some of the offences that could make it to the
list of crimes that could become a predicate offence under PMLA.
"Making tax evasion an offence liable to
prosecution is conceptually sound but caution needs to be exercised to ensure
that these provisions are not misused," said Pratik Jain, Partner, KPMG.
The government faces pressure from the
Opposition as well as the judiciary to demonstrate effective measures to tackle
black money. The Special Investigation Team on black
money headed by Justice MB Shah has suggesting designating income-tax
evasion as a criminal offence.
As far as indirect taxes are concerned,
clandestine removal and misdeclaration of goods, under-invoicing, availing
credit by resorting to fraud, collecting service tax and excise duty but not
depositing it with the government and other offences that invite prosecution
could make it to the list of predicate offences. Customs offences such as over
and under-invoicing of goods are already in the ambit of anti-money laundering
law.
During the 2014 election campaign, Modi, as
BJP's PM candidate, had made the alleged prevalence of a vast quantum of black
money -- particular fund kept abroad - part of a narrative of massive
corruption supposedly tolerated or even encouraged by the previous government.
Modi had also promised vigorous steps to retrieve black money.
"It (applying PMLA to tax evasion) would
have to be a political call," said another official adding that all
aspects need to be weighed, especially the possible impact on investment.
India, which is a member of the Financial
Action Task Force, is obliged to designate these offences as tax crimes and
bring them under the ambit of its antimoney laundering law in line with the
latest global standard prescribed by an inter-governmental body founded by the
G7 countries to develop policies to combat money laundering and terror
financing.
The global plan to bring income-tax offences
under the anti-money laundering law was unveiled in February 2012.
Many countries have already incorporated such
offences in their money laundering laws. The new government had discussed these
proposals ahead of its first budget in July but was not keen to take them up in
a hurry as there was little time for detailed discussion.
If these offences become scheduled offences
under the anti-money laundering law, they will attract rigorous imprisonment of
three to seven years and a fine of up to Rs 5 lakh. Usually, trial is also
faster as offences under PMLA are tried in special courts and the onus to prove
innocence lies on the accused.
At present launching prosecution for tax
offences is a cumbersome process and bringing it under the PMLA could give tax
authorities powers to combat black money.
Source:-The Economic Times
