Public Interest Litigation May Stall Scheme
Chartered accountancy firms said they are encouraging their clients to avail of the Voluntary Disclosure of Income Scheme (VDIS) even as a former Central Board of Direct Taxes (CBDT) member warned yesterday that the new amnesty scheme could be in jeopardy if a public interest litigation is filed against it.
VDIS offers tax evaders the opportunity to come clean without penalty.
K Srinivasan, former member of CBDT and currently the consulting editor of the Corporate Law Journal, said: The attractive aspect of the governments latest amnesty scheme is that the tax rates are substantially lower this time. But this is unconstitutional and an open premium to harbour dishonesty.
The tax rates now is much lower than what the tax evaders would have paid in the normal course. If a public interest litigation is filed against it, the courts will certainly have some nasty things to say, Srinivasan said.
The 1997-98 Finance Bill has cut the tax rate for the highest personal income bracket to 30 per cent from 40 per cent and the corporate tax rate to 35 per cent from 40 per cent.
Srinivasan said he was pessimistic about the success of the current scheme. There were innumerable such amnesty schemes during the past few decades and not one of them has succeeded. All of them began with high hopes but they somehow dissipated eventually.
Chartered accountancy firms, however, said they have told their clients that this was their chance to come clean.
It is an attractive and a simple scheme. Individuals and corporates who have evaded tax before will now have to pay substantially lower taxes, Ajay Vohra, a chartered accountant, said.
Srinivasan, however, said this trend of lower taxes established in each subsequent amnesty scheme will encourage tax dodgers to postpone their availing of the amnesty in anticipation of a reduced tax rate in the next one.
Tekan Keswani, secretary (taxes), Associated Chambers of Commerce & Industry (Assocham), said the success of VDIS would depend on how well the government would market the scheme and also the confidence it would generate among the tax evaders.
The Federation of Indian Chambers of Commerce & Industry (Ficci) said VDIS is an improvement over the previous schemes and added it is a positive policy step for mobilising resources for infrastructure projects and social sector development.