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Social Media could be used to smoke out tax evaders in India

  • Mrinalini Singh
  • July 31, 2017
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The government will begin collecting all the virtual information of a person’s pictures uploaded on social networking site Facebook. These pictures of one’s shiny new car or an exotic holiday cottage may lead the Income Tax officials to the person’s door. With this, the government will look at the residents’ spending patterns with income declarations. This is called ‘Project Insight’ and it will complement the world’s largest biometric identity database and India’s most ambitious tax overhaul as policymakers try to get more people to pay up. It took seven years to build at a cost of about Rs 1,000 crore.

The data collection will start from next month under the name “Project Insight” which aims to collect information not only from traditional sources like banks but also from Facebook, Instagram. This will be used to match user’s spending patterns with their income tax declarations to figure out who is evading taxes. This will also put an end to the harassing raids on homes and offices by tax officials as the evaders can now be identified using virtual data.

The use of social media monitoring to check spending patterns is already being used in countries like Belgium, Canada and Australia. A similar program called ‘Connect’ in UK has prevented the loss of $5.4 billion in revenue, the London-based Institute of Financial Accountants said in a December 2016 report. L&T Infotech has agreed to the build-own-operate-transfer model, which means that while it will be running the project and earning revenues during the contract period, it will ultimately transfer the network to the government once the contract runs out, the report said.

Finance Minister Arun Jaitley had earlier said the number of persons under tax net has increased by 91 lakh after Prime Minister Narendra Modi’s demonetisation move and warned tax non-compliant persons to refrain from dealing in excessive cash and evaded money. According to government data, India’s tax-to-GDP ratio is about 17 per cent compared with 25 per cent for most Asian countries. Compliance will rise 30 per cent to 40 per cent during the first phase of the project, people familiar with the project said. All the existing data including credit card spends, property and stock investments, cash purchases and deposits will be migrated to the new system during this time and a central team will send postally or email blasts to prod residents to file tax declarations.

The second phase of this project will start by December. During this time, data analytics will mine, clean and process the information. Individual spending profiles will be created and inquiries will be more targeted. The last phase begins around May 2018 during which advanced systems will be used to predict future defaults and flag risks.

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