‘Naming & shaming’ tax defaulters is likely to work in India!

'Naming & shaming' tax defaulters is likely to work in India!

Income Tax’ Department’s ‘Name & shame’ drive is a welcome initiative for it can infamously work on the psyche of tax defaulters as social pressures in India are high and it is likely to work in the government’s favor!

The Income Tax department in India picked the right pulse by naming Indian defaulters in a drive to collect tax money! Making defaulters conscious of their public image for the fear of losing face in the public is what probably drove the IT department to publish the names of 18 defaulters who owe up to Rs. 500 crore taxes to the exchequer.

Interestingly, in California, there is a similar drive to name tax defaulters. California’s new law (effective from Jan 1, 2012) requires officials to publicize the names of defaulters who owe more than $100,000 in delinquent taxes. The measure also authorizes the Franchise Tax Board to publish the top 500 names and titles of corporate officers of listed companies as well as delinquent taxpayers’ professional license information (if available).

In India, the ‘naming and shaming’ drive is likely to work even as society’s “who’s who” and bigwig tax defaulters are more likely to succumb to societal and peer pressure and line up for the tax payers queue. Why? Indians are culturally sensitive about losing face in public even as the social fabric in India values honorable conduct, and public image matters to most Indians. Indians readily look down upon law-breaking denizens as irresponsible citizens due to the society’s inherent value system. In America, while people will move on even as Chapter 7 and 11 bankruptcies will happen, Indians are prone to feeling ashamed to appear in social gathering etc. It is a good way to encourage tax payment with a corrective approach. I feel it will work better in India as compared to America.

A welcome drive by the Indian government, I feel it will also help in building a level of public awareness about tax defaulters who violate the law by wrongfully holding public money. I like the intent of the public notice which publishes the PAN numbers and last known address of tax defaulters.

In California, the published list can impact professionals as they face loss or denial of professional licenses including a driver’s license, and it also prohibits tax defaulters from entering into contracts with state agencies (for goods and services etc.). The most recent FTB list got a hit of 4.5 million views within a week.

What do you think will help in furthering this drive in India?

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