Modi govt. to sniff out tax evaders from Facebook & Instagram posts

A photo of your shiny new car on Instagram or the Facebook post about your chic holiday cottage may lead the taxman to your door.

Starting next month, 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 citing rules on speaking with the media.

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 the U.K.’s ‘Connect,’ which is estimated to have cost some 100 million pounds. Since its inception in 2010, it has prevented the loss of 4.1 billion pounds ($5.4 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 December 2016 report.

India’s Finance Ministry spokesman D.S. Malik declined to comment on Project Insight. The government said last year it had contracted L&T Infotech Ltd.  an arm of India’s largest engineering conglomerate Larsen & Toubro Ltd. to help build the network and boost voluntary compliance.

Compliance will rise 30-40 per cent during the first phase of the project, the people said. During this time all existing data including credit card spends, property and stock investments, cash purchases and deposits  will be migrated to the new system and a central team will send postal or email blasts to prod residents to file tax declarations. There will be no physical interaction, they said.

The second phase will be rolled out by December, during which data analytics will mine, clean and process the information. Individual spending profiles will be created and inquiries will be more targeted. In the last phase, which will go live around May 2018, advanced systems will be used to predict future defaults and flag risks.

Safeguards are must,” said Rahul Garg, head of direct tax at PwC India. “It has to be seen how effectively data, which has become invaluable, is used for governance.”