Recently a standing committee of Parliament tabled a report on the status of unaccounted income and wealth, both inside and outside India. Three national bodies allocated the task of arriving at estimates, had come up with varying answers ranging from 7 to 12 percent of GDP, which were impossible to reconcile.

While deposing before the committee, the Chairman of CBDT (the Central Board of Direct Taxes) provided a window into the various Big Data Analytics efforts used by the tax department. These are complex systems that collect data from multiple sources, including social media, to assemble a profile of the taxpayer. A non-filers monitoring system or NMS focuses attention on non-filers with potential tax liabilities. The system assimilates and analyses in-house information as well as transactional data received from “third parties", to identify persons who had undertaken high value financial transactions but did not file their returns.

With the usage of Big Data Analytics, India is set to join a group of developed countries such as Belgium, Canada, USA, UK and Australia which already use Big Data to keep a check on tax evasion.

Another project called Project Insight has been initiated to strengthen the non-intrusive information driven approach for improving compliance and effective utilisation of information in all areas of tax administration. Under Project Insight, an integrated data warehousing and business intelligence platform is being rolled out in a phased manner.

Under this project, the Income Tax Transaction Analysis Centre (INTRAC) has been operationalised for handling data integration, data warehousing, data quality management and data enrichment including data analytics. A dedicated reporting portal has also been launched to provide a comprehensive interface between reporting entities and the Income Tax Department. The ‘Insight Platform’ is being used for identification of high-risk non-filers under NMS, selection of cases under Computer Aided Scrutiny Selection and for a centralised processing of information received under automatic exchange of information.

While questions of privacy and the overall security of personal information continue to remain, the availability of Big Data seems to have created a fertile pool for hunting for filers. Questions still remain on whether the data is being effectively trawled to reveal insights to bring non-filers to book.

Another example of the terra-bytes of data available is the linkage of the GSTN with the income tax information that further richens the data pool. GSTN has individual transaction-by-transaction data and in a single stroke, a data scientist can theoretically assemble a full profit and loss of a business which could be compared with the income tax paid by the business.

Already there are reports of several municipalities and states in India using drones to validate land and building records. Spatial surveys are used to generate 3D images of buildings, digitise land records and link assets on ground to transfer deeds and property tax assessments. It has been reported that the Lucknow Municipal Corporation will now use drone cameras to improve efficiency of its property tax assessment and collection process. The drones will be able to detect new properties which were otherwise hidden in normal surveys. This will increase the municipal revenue and enable the LMC to manage city infrastructure efficiently.

A possible similar scheme for surveying markets and vendors, using AI and predictive analytics from images gathered from public video cameras, can build a profile of economic activities in commercial areas. Driving digital payments and deliberately tightening paper money supply in the economy can help drive greater digital adoption, enhancing the ability to monitor economic activity.

Tapping into newer sources of information and using innovative methods to assemble data into actionable information will be areas that the tax department needs to work on, as tax rates are still high and tax revenues low, drawing up an impossible cycle. Newer ways to collect information on small traders that are outside the GST net today and also the focus on the sectors most prone to tax avoidance, can be some of the low hanging fruits.

The number speak for themselves. In a country of 1.2 billion people, we have only 0.45 billion PAN numbers issued to individuals. Only about half of these are linked to Aadhaar and only 0.05 billion even filed a tax return. Of those filed, barely 200,000 individuals reported an income of above INR 1 crore.

Rohinton Sidhwa is Director, Deloitte India

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