The department had put 10,000 under red mark, identifying them as potential evaders. It had consistently sent SMS and letters, requesting them to come under VDIS. "Now, the task force is verifying how many of them actually took benefits of the scheme," said a Ministry of Finance (MoF) official.
"That will lay down the ground for identifying people against whom investigation will begin for taking stringent actions," he told myrepublica.com.
The source further stated that the MoF was presently close to finalizing the manual for taking action against the tax evaders. Under the procedures agreed so far, the IRD would first sample out the people in the list and seek them to assess their property and pay tax for assets that have not been disclosed.
"In case they complied, the IRD will let them go after slapping 60 percent tax, which includes regular income tax of 25 percent, fine of 100 percent on tax (additional 25 percent) and interest for the period of evasion (averaged at 10 percent)," said the source.
In case the party denied and IRD through its investigation eventually established his/her tax liability, the department will move on to seize the property and also take action under fraudulent activity.
The tax manual cites that the actions for tax evasion recorded prior to April 1, 2002 – the date when new income tax act came into effect – will be taken as per the Income Tax Act 1974. For the evasion recorded in the later years, action will be taken as per the new Act.
According to the source, the two Acts mainly differ in terms of the rate of fine and penalties. Also the previous Act had granted IRD with judicial rights, whereas the present Act asks IRD to take refuge of the court in case it wishes to punish a party under fraud and other criminal offenses.
Also, the manual asks the IRD to grant 15 days duration to the party under investigation to furnish proof of complying with the law.
"So, do not expect rapid action against tax evaders. The actual action will be taken only after a month of starting investigation," said the source, referring to legal procedures, possible resistance of the tax evaders, and also administrative limitations of IRD.
milan@myrepublica.com
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