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Who Protects Indians From the Taxman’s Algorithms?
Image Credit: Flickr/ araswami

Who Protects Indians From the Taxman’s Algorithms?

 
 

The problem of regulating the economic lives of Indians has long vexed those unfortunate policymakers who rule the subcontinent. When confronted with fraud or tax avoidance, policymakers frequently turn to new technologies.

For example, historian Bhavani Raman observes that the appearance of forged bonds in Madras during the early nineteenth century sent Whitehall into panic, resulting in reliance on anti-counterfeit technologies such as stamped paper. It is easy to find Persian and Sanskrit texts on dealing with economic crimes in early manuscripts of Indian history, too.

In the era of the smart phone, the Modi government is betting that the vast quantities of data that citizens produce everyday can be harnessed to catch tax cheats and other economic miscreants. The state is now collecting information from services such as Facebook and Instagram to ensure that displays of wealth match declared incomes, and the project is known as Project Insight.

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In other words, if you claim thirty thousand rupees in income and then post photos of yourself posing in front of your new Lamborghini on social media, you will likely be flagged.

The $156-million effort will be executed by the Central Board of Direct Taxes (CBDT).

Indian conglomerate Larsen & Toubro has been awarded the contract, and the full implementation is projected to take seven years. In late 2016, former CBDT chairperson Rani Singh Nair told The Indian Express that mining the data of security and commodity transaction records had already produced “actionable data” for law enforcement.

Similar surveillance efforts are being conducted at India’s Financial Intelligence Unit. Empowered in 2002 by the Vajpayee government to crack down on money laundering and related offenses, the 75-person team is at work fulfilling their mandate through data analysis.

The state’s ubiquitous and persistent gaze becomes a powerful tool to bring economic criminals to justice.

Without suitable safeguards, however, bureaucratic overreach could erode fundamental rights of liberal Indians.

“The Indian government has near unrestricted powers in this matter,” said Professor Prashant Reddy, a legal scholar who studies how technological change impacts society, “That’s why it’s very important to make sure that these surveillance efforts are subject to some sort of judicial or parliamentary oversight.”

 

Granted, India is not exceptional in this regard, as other countries are also leveraging such tools to crack down on tax dodgers. Italy’s National Revenue Agency deployed the redditometro toward similar ends in 2013.

Yet, as we have witnessed in recent history, Indian governments have politicized tax law enforcement and used it to muzzle voices they find threatening. The lack of safeguards has even prompted the opposition to call these reforms “tax terror.”

For example, in response to Tehelka’s investigative reporting, which exposed corruption vis-à-vis defense procurement, the Indian government allegedly retaliated in the form of income tax raids on the publication’s investors.

These issues have become more acute, as the latest Union Budget has substantially expanded the powers of income tax officers. As columnist Mihir Sharma explained, authorities can conduct searches and seizures with impunity.

On the other hand, it is important to legally investigate those who engaged in economic crimes.

Professor Reddy suggests that balancing the competing tensions requires strengthening existing constitutional mechanisms to safeguard the rights of Indian citizens or to offer them some avenue to pursue legal redress. Given judges’ more apolitical nature, he suggests that increased judicial involvement is preferable, though parliamentarians and other elected officials can play a role, too. “If there is going to be parliamentary oversight, there should be a committee of MPs reviewing the workings of these committees on an annual basis,” he said. “At the very least, they should be required to seek a judicial warrant before engaging in any surveillance.”

The change of technology is remarkable in India.  When more Indians are making transactions on traceable mobile money platforms and sharing increasingly intimate details of their lives through social media, even a marginally competent government could scrutinize the economic activities of its citizens.

If India does not undertake the hard work of building the necessary safeguards, the country could find itself under the thumb of a “data-enabled” despotism.

Aswin Mannepali is a writer on Indian politics and society.

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