JOIN USReplying to questions in the Upper House, Union Finance Minister Pranab Mukherjee said since all VDS schemes offered discounted tax rates for those who disclosed their secret wealth, it was not fair to the common man who pay tax at a higher rate.
Voluntary disclosures are not complied with unless the rates of tax are reduced. In every such scheme, the normal rate of tax has been reduced, said Mukherjee who piloted one such scheme way back in 1975.
But, there were complaints to the government for penalising the honest tax payer and encouraging the dishonest tax payer. “There is a vested interest in first concealing some income and, thereafter, taking the advantage of these types of schemes, come out and have a little relief. Therefore, we are not very enamoured of such schemes,” Mukherjee said.
The minister said that the government did not have any estimate on the amount of black money being circulated in the economy. There are varying estimates from Rs 36,000 crore to Rs 500,000 crore.
Asserting that the government was committed to unearth black money, he said there were two effective instruments search and seizure and the survey through which the income tax departments collect information.
New Delhi was seeking amendment to the Indo-Mauritius tax treaty of 1980 wherein offshore firms resident in Mauritius are exempt from tax on capital gains. Mauritius wants to position itself as a financial hub and does not tax companies including Foreign Institutional Investors registering with it for investing in overseas markets such as India. “We want to amend the particular agreement with Mauritius. We offer to compensate the island nation for any loss in revenues because of such change in the treaty to check companies evading paying taxes both in India and Mauritius,” he said.