On Instagram or the Facebook post of a photo of your shiny new car, about your chic holiday cottage may lead the 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. Those who pay too little tax without raiding offices and homes as they currently do will be able to spot by the officials, the people said, asking not to be identified citing rules on speaking with the media.
Built over seven years at a cost of about 10 billion rupees ($156 million), 'Project Insight' will complement the world's largest biometric identity database and GST, as policy makers try to get more people to pay up, the country's most ambitious tax overhaul. In the world while the economy is among the fastest-growing, revenues aren't keeping pace, bloating PM Modi's budget deficit and triggering anxiety about over-zealous tax sleuths.
"For the tax administrations the way forward across the world data analytics is," said Amit Maheshwari, managing partner at accountancy firm Ashok Maheshwary and Associates near New Delhi. "By the tax officials this will also put an end to harassment as there will be no public interface. Perceived randomness in scrutiny will come to an end."
Including the countries lie Canada, Belgium and Australia are already using big data to unearth tax evasion that may have gone undetected without technology. Since its inception in 2010, it has prevented the loss of 4.1 billion pounds ($5.4 billion) 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 D.S. 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.
This is a long term project for L&T Infotech, chief executive officer and managing director Sanjay Jalona said, without specifying a time frame. The company 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 second phase will be rolled out by December, during which data analytics will mine, clean and process the information. In the last phase, which will go live around May 2018, advanced systems will be used to predict future defaults and flag risks.
The government use its tools for tax forcasting recommended by some of the analysts. How much business has slumped in a certain town following a flood could show by Data analytics, for example, which would help authorities better assess aid requirements as well as predict local revenues and plan finances.
The project scope’s has also led to concerns in a country where by the Supreme Court the government has repeatedly been told it doesn't consider privacy to be an absolute right. The OECD studied 21 countries that use technology to detect tax fraud and said in a March 31 report that while such methods offer a win-win by making compliance.
"Safeguards are must," said Rahul Garg, head of direct tax at PwC India. "It has to be seen how effectively data, which has become invaluable, is used for governance."