Chase Dirty Money

The income-tax department’s drive to cleanse politics of dirty money is wholly welcome, even if it comes late in the day. Politicians with assets disproportionate to their known sources of income must be brought to book. However, taxmen should nab evaders through intelligence and creative use of information technology rather than through raids and searches that are archaic, blunt instruments in law enforcement. It is indeed strange that the Election Commission had to nudge the I-T department to match the income-tax returns of politicians with the statement of assets declared by them in their affidavits. Such matching should have been automatic with annual information returns (AIR) that identify potential taxpayers by examining their expenditure patterns. This clearly shows the poor use of AIR to track down high net-worth individuals, including politicians, evading taxes. The I-T department should revive stringent scrutiny of information returns and bring more high-value financial transactions under the net. Data on spending patterns of individuals will never lose relevance, say, in property deals where tax evasion is rampant.

The I-T department merely has to match data provided by the registrar of properties with the income-tax returns of the individual. This is no rocket-science , with fool-proof permanent account numbers, the tax department’s unique identity number. However, audit trails snap when transactions reported by various agencies and gathered through the tax information network do not have a PAN. The tax department should, therefore, make declaration of PAN compulsory for all high-value transactions, and not just for a select few. Corruption scandals have tainted politicians and businessmen in this season of scams. Politicians and public figures should be made to disclose their income-tax returns under the Right to Information Act. This will be in the larger public interest. However, as we have argued in our earlier columns, the mother-of-all-reforms would be to make the funding of political activity transparent. Institutional funding of politics holds the key.