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
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