The Revenue Secretary N. K. Singh is a happy man now. After the unprecedented performance of the VDIS, which could coerce/convince 4,66,031 tax dodgers to contribute Rs.10,000 crores to the exchequer, he deserves to be congratulated. The scheme was successful despite apprehensions expressed in many quarters that the information submitted by the assessees would provide a handy tool to the Dept. to harass them. The apprehensions were not unfounded but were based on the past not-so-reliable record of the Dept.. It was after several threats and actual transfer by the Finance Ministry , the officials got the message that they could not leak the information or harass the tax-payers.

It is this attitude of the Income Tax (IT) Dept. that has always scared the taxpayers from voluntary compliance. The Very Difficult to Implement Scheme could have generated a much larger revenue but for the ambiguous drafting, confused IT dept., and a spate of contradictory circulars which, instead of simplifying the matter did exactly the opposite. However one thing which everybody appreciated was that there was definite sincerity on the part of the dept.. These efforts on the part of the Finance Minister has generated the right amount of goodwill and a real era of tax-compliance has begun. It is however imperative that the IT Dept. continues to enhance the goodwill that it has generated.

The earlier schemes had netted Rs. 776.6 crores worth of tax at then prevailing prices and Rs. 3471 crores at current 1997 prices. The collection of VDIS was almost three times the sum of tax collected in all past schemes taken together at current prices. Why did VDIS work ? First, because lower tax rates encouraged better compliance. Earlier , higher tax rates , coupled with a hostile IT dept., lack of proper database and reconciliation facilities in the dept., were sufficient incentives for the taxpayer to hide his income. It has been proved the world over that with every reduction in tax rate the compliance - and consequently the revenue - increases. This continues till a level is reached where the reduction would lower the total revenue. It is this trade-off point which every Finance Minister should strive to reach. It is the point where the pinch to the taxpayer is the least and the revenue to the exchequer is the optimum. In India we are still a bit far from this point.

Secondly, never before the government has resorted to such professional advertisement campaign, which provided enough carrot and sticks to the taxpayers to come clean. This was a quantum leap from the earlier davp. advertisements which were so listless that hardly anybody read them. The earlier advertisements looked more like a notice from the tax department which instead of securing compliance scared the taxpayers away. Though VDIS advertisements were a great deal unethical (remember taxman knocking at the door! ) , they could create very good awareness of the Scheme. In all earlier schemes it was the consultant who advised the client to declare, this time it was the client who went to the consultant expressing his desire to declare.

Thirdly, there was a clear element of threat in the form of return to the raid raj , which induced the taxpayers to declare, as there would be no second chance. To exhibit its prowess , the dept. carried out Surveys and Search operations all over the country. The Revenue Secretary went to the extent of stating that the dept. had a complete list of tax-dodgers and people not declaring will not be spared. So much propaganda was made that it looked as if the heaven was going to fall immediately after the closure of the Scheme, on those who could not declare.

In spite of overwhelming success of the scheme, what has been unearthed is a mere tip of the iceberg. As per one estimate, an amount of Rs.5,00,000 crores of black money is in circulation in our economy. The scheme has been able to tap Rs.33,000 crores which is barely 7% of the black money in circulation. As per another estimate, what the government has been able to tap is a mere ten days accumulation of the total unaccounted money being generated in the economy. If the compliance is not encouraged in future, the accretion to the black money would bring us back to square one in three years time , because it is the unaccounted money which grows faster. We have had at least eight amnesty schemes since 1951. With the launch of every scheme , the then Finance Minister had always stated categorically that it was the last scheme and no further scheme would be launched in future. Their successors have proved them wrong , and there have been a refuge to the tax-evaders after every five years. We have been always ignoring the regular dose of medicine , thus making the surgery necessary periodically. Let us hope the Govt. realizes the facts this time and continues to provide a more friendly and rationalized system.

The VDIS has proved beyond doubt that it was the inefficiency of the previous governments which had resulted in such vast accumulation of unaccounted money. There are many transactions where the dark coloured money keeps growing. Real estate is one area where the largest chunk of black money is created. The reason: exorbitant stamp duty and registration charges. Lot of black money is generated because many units suppress turnover in order to remain within the exempt limits under Central Excise Law. Over-invoicing imports and under-invoicing exports also generates a great deal of unaccounted money. All these factors are extraneous to the IT dept. : black money generation would continue even if the IT Act is simplified and rationalised, unless these factors are taken care of.