India's taxman follows tax dodgers - on social media

NEW DELHI • A photograph of your shiny new car on Instagram or the Facebook post about your chic holiday cottage may lead India's taxman to your door.

Starting next month, Indian Prime Minister Narendra Modi's government will begin amassing a warehouse of virtual information collected not just from traditional sources like banks, but also from social media sites, as it looks to match residents' spending patterns with income declarations, said people familiar with the matter.

Officials will be able to spot those who pay too little tax without raiding offices and homes as they currently do, the people said, asking not to be identified.

Built over seven years at a cost of about 10 billion rupees (S$212 million), Project Insight will complement the world's largest biometric identity database and India's most ambitious tax overhaul as policymakers try to get more people to pay up.

While the economy is among the fastest-growing in the world, revenues are not keeping pace, bloating Mr Modi's budget deficit and triggering anxiety about overzealous tax sleuths.

"Data analytics is the way forward for tax administrations across the world," said Mr Amit Maheshwari, managing partner at accountancy firm Ashok Maheshwary and Associates near New Delhi.

"This will also put an end to harassment by tax officials, as there will be no public interface. Perceived randomness in scrutiny will come to an end."

  • $212m

  • Cost of building Project Insight, which will complement the world's largest biometric identity database.

Countries including Belgium, Canada and Australia are already using big data to unearth tax evasion that may have gone undetected without technology. India's efforts resemble Britain's Connect, which is estimated to have cost some £100 million (S$178 million). Since its inception in 2010, it has prevented the loss of £4.1 billion in revenue, and the number of criminal prosecutions has risen to 1,165 from 165 a year, the London-based Institute of Financial Accountants said in a report last December.

The Indian government said last year it had contracted L&T Infotech - an arm of India's largest engineering conglomerate Larsen & Toubro - to help build the network and boost voluntary compliance.

This is a long-term project for L&T Infotech, said chief executive and managing director Sanjay Jalona. The company has agreed to the build-operate-transfer model, which means that while it will be running the project and earning revenue during the contract period, it will ultimately transfer the network to the government once the contract runs out.

India's tax-to-gross domestic product ratio is about 17 per cent compared with 25 per cent for most Asian countries, according to government data.


A version of this article appeared in the print edition of The Straits Times on July 31, 2017, with the headline 'India's taxman follows tax dodgers - on social media'. Print Edition | Subscribe