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Old 3rd May 2016, 16:46   #1
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Default Luxury cars outnumber tax-paying millionaires! Income tax evasion?

http://www.indiatvnews.com/business/...xpayers-327222

Recent data released by Finance Ministry sheds light on large scale tax evasion in India. Atleast that's what it seems.

"Besides the mismatch cited through data by different sectors, the estimation of wealth in India by financial institutions also presents a different picture. For example, a 2013 Kotak Wealth Management and CRISIL report titled ‘Top of the Pyramid’ estimated the number of Indian ultra-high net worth households — each with a minimum net worth of Rs 25 crore — at 81,000 in 2011-12, a growth of 30 per cent over the previous year."
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Old 3rd May 2016, 17:09   #2
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

Well, its still a vague comparison upfront, most of the so called Millionaires have these assets under the Companies account, not individual. Similar is with 5/7 star hotel bookings or business class travels.

Just what I thought, opinions may differ.
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Old 3rd May 2016, 17:20   #3
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

Most high end cars are bought by corporates for use by their top executives/owners, etc... This kind of a random comparison makes no sense.

Just some TRP seeking headline.
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Old 3rd May 2016, 17:31   #4
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

yes, direct comparison, with the data released as of now, cannot be made. But, seriously!

see the forbes report, how many crorepatis are there in India. I dont know the methodology they use to find that out, but even that seems a bit conservative to me.
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Old 3rd May 2016, 18:12   #5
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

IT department keeps a close eye on the luxury car purchases. A very keen eye.

A decade back, anyone who bought a new Merc, his IT returns were scrutinized with a fine comb and in many cases, a scrutiny was ordered too, I am sure the practice is still in place.

Tax evasion is still quite rampant, but quite mellowed down from the levels it used to be, since the avenues have reduced.

But as pointed out by many, there is no direct co-relation between luxury car sales and number of crorepatis.

Last edited by vinit.merchant : 3rd May 2016 at 18:16.
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Old 3rd May 2016, 18:38   #6
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

what if one person has multiple high end luxury cars - the same person can have an S-Class and a 7-series or a Rolls-Royce and Bentley
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Old 4th May 2016, 09:52   #7
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

Comparison with luxury car sales is just one part of it, though flawed, as everyone here is pointing out. The real issue is far more serious. Low direct tax collection, on account of tax evasion by HNIs, and even other economic classes, increase burden on indirect taxes on all common people. Indirect tax is paid by everyone, even the poor, whenever they buy any product or service.
Plus, it is a known fact, that, (apart from salary class) the more money you have (or the more avenues of earning money you have), the more means are available to reduce your tax liability in India.

Businessmen open multiple companies, with complicated holding structures and channel the money flow in such ways that it become extremely difficult to pinpoint tax evasion. small town businessmen don't even document their revenues and profits. Service providers (clinics, Coaching classes, grocery shop owners etc) work in cash terms and evade tax big time. Any many of these have multiple cars, foreign holidays and luxury spends, again in cash wherever possible. While the common men, poor alike, pay from their nose, withdraw ATM cash to avail these services.

Salary class people? well, no need to say anymore, we are the "Dhol", getting beaten from both sides.
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Old 4th May 2016, 10:42   #8
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

AS everyone has already pointed out, a comparison of the 2 databases is not sensible, since luxury cars could be purchased by companies, or there could be situations where one individual has more than one luxury car.

Additionally, there are many folks in India who are exempt from taxes due to their income being from agriculture or sports or music or diplomats.

A person Sharad Pawar has no luxury cars in his name, but is regularly seen in luxury cars. Most politicians are in the same category, and even though they do not have such luxury items in their names, they avail the use of yachts, private jets, luxury cars. Heck Praful Patel's daughter even used Air India jets for her personal use.

Fact is that there is rampant evasion of taxes by the rich in India, since the laws allow this. The only folks who have no choice but to pay their taxes is the salaried class and they're the ones who are supporting the nation, but again, thats because they have no choice.

The only saving grace is that the proportion of indirect taxes is also increasing, and that is based on consumption, so there is very little possibility of evasion on that front. The more you consume, the more tax you pay.
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Old 4th May 2016, 11:30   #9
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Default re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

Anybody who owns a business(even a small one) will always buy his automobile in the same of the firm/company for depreciation / other benefits.

The government must crack down on use of black money for conducting business.
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Old 4th May 2016, 16:18   #10
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Default Re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

When 2 and 2 were put together for the sake of it.

While we all know about the extent of tax evasion that people indulge in, simply correlating two numbers (if I can call it correlation at all) isn't the right thing to do.

What is next, rise in the number of athletic shoe sales and an equal increase in the number of computers being sold, you get the drift.
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Old 4th May 2016, 16:31   #11
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Default Re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

What a brilliant comparison!
As per this comparison, if I earn 20L last year, I am qualified to buy only a car upto 20L (i.e my full earnings) and if I end up buying an A3 or a C Class, then I must be a tax evader!
It is irrelevant how much income tax I paid last year, what I earned two years earlier, the investments I have, the amount of money banks are willing to give as loan, the type of ownership agreement the auto company is willing to enter etc.
These are the kind of headlines that easily catch the attention of the masses, who will be ready to complain about the "filthy rich", without any facts.
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Old 4th May 2016, 16:45   #12
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I think this is just to generate more TRP. Cars are the last expensive good that are 100% white. While the business house can deal in cash, no car can be bought in cash.

Also, a successful business house might even buy 5-10 mercs for their top level managers. Doesn't mean they don't pay tax. What about hotels? They have a fleet of luxury cars.
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Old 4th May 2016, 16:47   #13
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Default Re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

Quote:
Originally Posted by fine69 View Post

What is next, rise in the number of athletic shoe sales and an equal increase in the number of computers being sold, you get the drift.
"only 18300 odd tax paying crorepatis" is the leading quote sir. Agree, not a significant correlation with the no of luxury cars sold, but it is also not way off the mark too. Which company gives a land rover to its employee? A jaguar maybe, even a Bentley maybe, but Land rover? (might be a dream working with such companies ). And even those who get company owned luxury cars, are they not crorepati? I guess, all these 1800 odd crorepatis who indeed pay taxes, are mostly salary class executives falling in this "TDS" category. Where is the other lot? The businessmen? The coaching classes? the Clinics? I can bet there will be more than 20 crorepatis running shops in Nehru place (Delhi) alone. Same with Gaffar market, lajpat nagar, and countless other places across India. And as soon as you try paying through card, they say "sir it will cost 4% more if you pay by card"
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Old 4th May 2016, 17:57   #14
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Default Re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

I don't buy the tax evasion nonsense - after all, a car is probably the most expensive good that you have to buy completely in white money. There is no work around where people can pay cash and drive away without a paper trail.
The IT department does keep checks on such purchases. Heck, during festive season, they even keep a check on how much you purchase online!

Secondly, given how finance schemes are on the rise, this isn't surprising. More and more people can afford these luxury vehicles today.

Third - company owned / leased vehicles. Yes, there are many companies who's owners draw less than the INR 1Cr salary, but if the company is doing well - it can afford to buy the promoter a nice swanky BMW / Mercedes.

Lastly - there are quite a few who have multiple luxury cars at their disposal.
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Old 4th May 2016, 18:06   #15
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Default Re: Luxury cars outnumber tax-paying millionaires! Income tax evasion?

I have absolutely no doubt that tax evasion is huge in India. However, using this correlation to prove it is absolute madness.

Just to give you a simple example, my parents and my in-laws both have two vehicles each at home. Neither of them are tax payers because they manage coffee estates (agriculturists pay no tax). What does that now prove
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