Is tracking social media to catch tax evaders a breach of privacy?

  • The I-T department is planning to revamp its data collection methods under Project Insight. One of its data sources will be social media, where it will flag a mismatch between an individual’s income and social media posts
  • Nilanjana Chakraborty asks experts if tracking social media posts of an individual amounts to breach of taxpayers’ privacy

The income tax department has been coming up with new ways to identify evaders. In 2016, it launched Operation Clean Money, but found some gaps in the methodology later. The department then sought to revamp its data collection methods under Project Insight. The project, which is still in the works, is supposed to be a machine learning and big data-driven information management system. One of its data sources will be social media, where it will flag a mismatch between an individual’s income and social media posts. Nilanjana Chakraborty asks experts if this amounts to breach of taxpayers’ privacy

Selective mapping on social media may not work

Archit Gupta, Cleartax
Archit Gupta, Cleartax

Archit Gupta, Founder and chief executive officer, Cleartax

Improving tax compliance requires a shift in mindset for both the authorities and taxpayers. Tax policy must reduce evasion, boost confidence of taxpayers in the system and be equitable.

It can’t be said with certainty that pursuing taxpayers on social media will translate into higher tax collections. Sufficient checks and balances in the financial eco-system should prevent tax leakage. Selective behavioural mapping or social media tracking may be counter-productive if taxpayers continue to deploy ingenious ways of evading taxes.

The tax department can seek relevant information, but it must not infringe upon a taxpayer’s privacy. Besides, it can deploy tools that verify foreign travel and track high-value purchases to create a compliant environment. Strong enforcement that encourages compliant behaviour and one that is not solely focused on boosting collections can have a positive impact overall.

Country needs it, but there can be unintended consequences

Sonu Iyer,  EY India
Sonu Iyer, EY India

Sonu Iyer, Tax partner and people advisory services leader, EY India

There has always been a section of people in India that has not paid the right amount of tax corresponding to income. I think the government wants to use technology appropriately to be able to identify such people.

Some of these could be perceptions. For instance, there are people in the agricultural lobby where there is no taxable income. But it may possibly also reveal people who should have been paying tax but are not doing so. You can’t fault the government for trying.

As far as privacy is concerned, it is an issue and something this sweeping can have some unintended consequences. But in India, people who don’t pay taxes still consider it okay to be ostentatious in their public spending. The revenue enforcement authority would want to ensure that what is visible in the public domain is accounted for.

If we look at it from the perspective of what the country needs, it can be justified.

Posts on public profile can’t be seen as breach of privacy

Naveen Wadhwa, Taxmann.com
Naveen Wadhwa, Taxmann.com

Naveen Wadhwa, deputy general manager, Taxmann.com

The IT department does not want to harass honest taxpayers. The finance minister’s interim budget speech indicated that only 0.5% of tax returns were selected for scrutiny. For individual taxpayers, until the department has some corroborative evidence, it does not initiate a scrutiny.

The new ITR forms seek more disclosures about tax affairs and financial transactions. The department is trying to get as much information as possible from assessees as well as sources such as banks and mutual fund companies.

It’s common for people to flaunt vacations, cars and homes on the social media. If these don’t match your tax return, your case can be flagged. But social media posts won’t be taken as the only evidence to launch a scrutiny, they would just be a base to start investigating. If you put something on your public profile, it is in the public domain and can be collected as evidence, and wouldn’t be a privacy breach.

As far as your income is concerned, no data is private

Kuldip Kumar, PwC India Global Mobility Practice
Kuldip Kumar, PwC India Global Mobility Practice

Kuldip Kumar, Partner and leader, PwC India Global Mobility Practice

The government’s focus on catching tax evaders is quite strong. Several changes have been made in the recently notified tax return forms for financial year 2018-19, seeking additional details. This will help in automatically validating or cross-checking income and other details with the information that tax authorities may already have from other sources.

Today nobody can hide information successfully, especially because social media is freely accessible and is opening us up to scrutiny. There are, of course, data privacy concerns, but such concerns are everywhere. If you go to a bank to apply for a loan, you will be flooded with phone calls from other banks in under an hour. But it remains to be seen how people will handle this.

As far as your income is concerned, no data is private. The details of everything from your salary to interest income are recorded and cross-checked in an automated manner.

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