Instagram posts will soon help sniff out tax fraud
‘Project Insight’ will complement the world’s largest biometric identity database and India’s most ambitious tax overhaul
Aphoto of your shiny new car on Instagram or the Facebook post about your chic holiday cottage may lead India’s taxman to your door.
Starting next month, Prime Minister Narendra Modi’s government will begin amassing a warehouse of virtual information collected not just from traditional sources like banks but also from social media sites, as it looks to match residents’ spending patterns with income declarations, said people familiar with the matter.
Officials will be able to spot those who pay too little tax without raiding offices and homes as they currently do, the people said, asking not to be identified citing rules on speaking with the media.
Built over seven years at a cost of about Rs10 billion (about Dh572.8 million), ‘Project Insight’ 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.
While the economy is among the fastest-growing in the world, revenues aren’t keeping pace, bloating Modi’s budget deficit and triggering anxiety about overzealous tax sleuths.
“Data analytics is the way forward for tax administrations across the world,” said Amit Maheshwari, managing partner at accountancy firm Ashok Maheshwary and Associates near New Delhi. “This will also put an end to harassment by tax officials as there will be no public interface. Perceived randomness in scrutiny will come to an end.”
Countries including Belgium, Canada and Australia are already using big data to unearth tax evasion that may have gone undetected without technology. India’s efforts resemble the UK’s ‘Connect,’ which is estimated to have cost some 100 million pounds (about Dh481 million).
Since its inception in 2010, it has prevented the loss of 4.1 billion pounds in revenue and the number of criminal prosecutions has risen to 1,165 from 165 a year, the London-based Institute of Financial Accountants said in a December 2016 report.
India’s Finance Ministry spokesman DS Malik declined to comment on Project Insight. The government said last year it had contracted L & T Infotech Ltd. — an arm of India’s largest engineering conglomerate Larsen & Toubro Ltd. — to help build the network and boost voluntary compliance.
India’s tax-to-GDP ratio is about 17 per cent compared with 25 per cent for most Asian countries, according to government data.
Compliance will rise 30 per cent to 40 per cent during the first phase of the project, the people said.
During this time all existing data — including credit card spends, property and stock investments, cash purchases and deposits — will be migrated to the new system and a central team will send postal or email blasts to prod residents to file tax declarations. There will be no physical interaction, they said.
The second phase will be rolled out by December, during which data analytics will mine, clean and process the information.
Individual spending profiles will be created and inquiries will be more targeted. In the last phase, which will go live around May 2018, advanced systems will be used to predict future defaults and flag risks.