The evil that men do lives after them. The good is oft interred with their bones Julius Ceasar, William Shakespeare Apart from the 13 Japanese firms and one French bank whose names he has slandered in his audit report on the VDIS tax-amnesty scheme of 1997, the biggest blow that Comptroller and Auditor General of India V.K. Shunglu has dealt is really to himself. For, by allowing his officers to name these multinationals (MNCs) for no apparently good reason under VDIS, names of tax defaulters were to be kept secret Shunglu's CAG has opened itself up to the charge that, wittingly or unwittingly, it has played into the hands of the swadeshi brigade which will use any excuse to discredit MNCs.In the bargain, this has diverted attention from a very incisive report on the flaws in the VDIS, and distortions introduced into it by officials in the Central Board of Direct Taxes. Distortions that allowed people to short-change the exchequer of thousands of crores, and which, if acted upon, could even lead to a few dismissals. But first, Shunglu's unpardonable sin.When the CAG decided to audit VDIS declarations, to keep the secrecy alive, names of declarants were not given to the officers auditing them instead, codes were assigned to each assessee. The CAG, however, decided to do some sleuthing on its own in order to properly audit the scheme. It built up databases of, for example, people who had been accused of tax violation, or those who had been chargesheeted in various cases such as TADA, and so on (the way Parliament cleared the VDIS, they were debarred from availing of it). It then ran the VDIS declarants' list against all these databases.When it ran one of the databases on foreign companies, it found several of the addresses of the VDIS declarants (it's important to note, the CAG never had the names of the declarants) were similar to those on a list supplied by the CBDT to Parliament earlier a list of MNCs who had been evading taxes on the incomes of their employees! The CAG then decided that giving the names of firms whose employees had availed of VDIS wasn't violating secrecy.But why didn't the CAG run the addresses of Indian professionals who filled VDIS forms against, say, the addresses of Indian companies? The CAG has no answer, except that these checks didn't lead to anything, perhaps because, unlike some of the foreigners, the Indian professionals were too smart to give the addresses of their parent firms on their declaration forms!This lapse on the CAG's part, however, should not take away from the high points of its commendable work, more so since some pro-active work from the government right now could stop all possibilities of similar goof-ups and leaks in the future. So what are these major CAG achievements anyway?Well, it found, for instance, that people debarred from availing of the scheme were allowed to do so. This includes 17 people in the Cobbler Scam in Maharashtra and 8 hawala accused, as well as several others accused of tax violations. Guess how this happened? Well, on July 25, 1997, a CBDT circular allowed such declarations despite the VDIS Act clearly prohibiting this. And, in July, the Pune Chief Commissioner said that there would be no enquiry to ensure that debarred persons did not file VDIS declarations.Another July circular actually allowed people to file VDIS returns for the year 1997-98 despite not filing regular income tax returns, and thereby gain from the lower amnesty tax-rate; yet another declared that no `unusual declarations' would be probed before issuing VDIS-amnesty certificates this allowed declarants, for instance, to falsely declare their wealth in the form of silver utensils and claim, in some cases, that these were bought way back in 1933 when silver prices were a fraction of the 1997 value. This effectively lowered the VDIS tax rate from 30 per cent to 2-3 per cent.The CAG also cites cases of individual tax commissioners who allowed people to flout even the stated rules which allowed jewelry declaration to be massively under-valued by Rs 1,731 crore, which caused a tax loss of Rs 519 crore. Besides this, the fact that the politicians-bureaucrats who designed the scheme chose April 1, 1986 as a cut-off date instead of the more logical April 1, 1997 (the scheme was announced in 1997, wasn't it?), also allowed declarants to value their jewelry at 1986's lower value this led to an under-valuation of Rs 9,671 crore and a tax-loss of Rs 2,901 crore.The same politician-bureaucrat nexus, similarly, allowed tax-defaulters to declare land and buildings at any value they chose as a result, people declared buildings in Calcutta and Mumbai as having a value of Rs 5,500!Essentially, right from the time the scheme was implemented to the way its implementation was distorted, it's a real can of worms. It'll be a real pity if Shunglu's remarkably naive, and totally unnecessary, omission is allowed to cloud this fact and prevent any action on it. Particularly since the government still has the option of doing damage control on the CAG's MNC faux pas. The evil that men do.
