Delhi eyes luxury car buyers in crackdown on tax evasion

Lamborghini India head Sharad Agarwal (left) and managing director of Lamborghini Bangalore T.S. Sateesh with the Lamborghini Huracan 610-4 Spyder during its launch in Bangalore on May 13.
Lamborghini India head Sharad Agarwal (left) and managing director of Lamborghini Bangalore T.S. Sateesh with the Lamborghini Huracan 610-4 Spyder during its launch in Bangalore on May 13.PHOTO: AGENCE FRANCE-PRESSE

NEW DELHI • Lamborghini rolled out its new US$580,000 (S$800,000) supercar onto the streets of India this month, but local millionaires tempted to buy the flashy convertible could hit a bump in the road, thanks to the taxman.

Prime Minister Narendra Modi has vowed to crack down on tax avoidance - notorious in India, especially among the super rich - to tackle yawning inequality in the world's second-most populous nation.

Figures published last month for the first time since 2000 showed just how few of India's top earners pay tax - only six people earning over 500 million rupees (S$10.2 million) filed returns from 2012 to 2013.

The numbers are hard to square with the estimated 2,100 ultra-wealthy Indians whose net worth exceeds US$50 million, according to the Credit Suisse Global Wealth Report, or a Forbes list that found 84 billionaires.

New Delhi's glitziest hotels host week-long, multimillion-dollar weddings, drawing thousands of guests, with parties awash with Veuve Clicquot and DJs flown in from Ibiza.

But now the government's top taxman is looking to join the dots, by cross-checking income declarations with data from luxury car dealerships as well as property registers, fixed bank deposits and stock market transactions.

"The people in the higher bracket are not paying the correct amount of taxes. This is a fact," revenue secretary Hasmukh Adhia told AFP of the new initiative. "We need to do something about it. We are taking a lot of enforcement action."

Billions of dollars in unpaid taxes deprive the Indian government of revenues that could be spent on changing lives in a country where 270 million people survive on less than US$2 a day, according to the World Bank.

But rounding up tax is difficult when dodging it is practically a national sport, from small-time landlords who request rent in cash to large-scale money laundering via state lotteries.

Across all levels of society, India's taxpayers are startlingly few, with only around 2.5 per cent of its 1.2 billion population filing returns - largely because the so-called unorganised sector employs so many people.

Mr Andrea Baldi, head of Asia-Pacific for Lamborghini, said tracking its sales is unlikely to net the government many avoiders.

"The people in India who are not declaring their tax are not the kind of people that will buy a very flashy car and drive in front of the entire city displaying their wealth."

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on May 23, 2016, with the headline 'Delhi eyes luxury car buyers in crackdown on tax evasion'. Print Edition | Subscribe