At collections of some Rs. 3,000 crore, the Voluntary Disclosure of Income Scheme (VDIS) has defied conventional wisdom on tax amnesty schemes. With about ten days to go before closure, collections will almost certainly gather pace as many fence-sitters decide to jump.But the significance of the scheme lies elsewhere: in the acknowledgement that the carrot of tax amnesty and moderation will only work, in a country of notorious tax-dodgers and a flourishing black economy, when a firm stick is wielded alongside. There are heartening signs that the stick is being wielded. Its relatively negative manifestations have got, as ever, disproportionate attention.Businesses have set up a cry about arm-twisting by authorities. Taken to an extreme, these could boomerang. But some pressure is not bad for those who will not come clean even with incentives.The VDIS is, in fact, only the most prominent of an overall policy initiated in the past year which, properly sustained, should lay the ground for improved tax collections. These relate to the insistence on a filing of returns by people whose lifestyle suggests that they probably should be taxpayers, such as ownership of cars and phones, foreign travel, etc. It is crucial that a good database of existing and potential taxpayers is built up on the strength of these and similar criteria: the more the variables, the more sophisticated the database will become. Inputs from the VDIS would, and should, go into such a database. The VDIS offers an amnesty for past misconduct; it does not guarantee permanent immunity. Those who have benefited from it should now have to keep to the straight and narrow.The VDIS has been important in this scheme of things chiefly because of its high visibility and good marketing. Viewers could have been forgiven for thinking poorly of the advertising agency that handled the VDIS TV ad blitz. The fact remains that this has been the most high-profile, well-packaged and determinedly-pushed amnesty scheme. The message has gone home that the Government means business, and it has helped that Finance Minister P. Chidambaram put his prestige on the line. Small wonder that, while public sector disinvestment of Rs. 7,000 crore remains a pipedream, the VDIS has mopped up about half that sum with far less fuss. If its collections were not to devolve significantly to states, it would have made a significant deficit in the Centre's fiscal deficit. Of course, it still will make a dent in the overall fiscal deficit. Naturally, there have been hitches in the scheme's operation.The ingenuity of long-standing tax dodgers could hardly go to sleep with reference to the VDIS. There was large-scale abuse in the form of declarations of new silver passed off as 1980s' purchases and taxed on the basis of those, far lower, prices. This made it possible to launder black money at laughable tax payments. The Government's move to plug loopholes mid-course has been questioned in court. But the message at least is right that while the Government wants to mobilise black-money resources, it is not to be taken for a ride. After bold tax cuts, the Government has moved swiftly where action was crucial but utterly lacking: enforcement. So far, it remains in persuasion mode. To make the transition from cajoling to real enforcement, the good work has to be kept up.
