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India updated its tax informant scheme to hike the reward ceiling from the equivalent of USD 22,000 to USD 147,000 for hiding income. The reward for disclosure on black money is now set at USD 734,000 by the Ministry of Finance of India. Compared to this in China, the disclosure incentive does not go beyond USD 15,400. Learning from the benchmark set by the Ministry of Finance of India, China should look to increase its reward limits.
To make the tax systems more effective and clamp down on undeclared incomes there must be suitable tax reforms in line with the advancements in technology. The tax reforms should be such that the department should play major roles rather than Whistleblowing becoming the leading method. Whistleblowing must only be looked as a supplement to tax reforms and functioning of the tax departments and not as an alternative.
The debate should however not be limited to just increasing rewards. Parallel to this the related laws and regulations to need to be made more effective. There must also be a mechanism to offer better protection of the whistleblower’s information as well as their own safety. At the same time, the privacy of the citizens mustn’t be breached in order to collect information. Yes, people must be encouraged to disclose incomes but the tax department to needs to be revolutionised to scrutinise better.
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