Stuffed animal heads adorn the walls of Kunwar Vikram Jeet Singh’s mansion on the outskirts of Delhi, and he also owns a three-bedroom apartment in a gated condominium in the city. His children go to one of India’s most exclusive private schools. Yet Singh doesn’t pay income tax because he’s a farmer.
Singh is one of thousands of rich landowners who don’t need to pay taxes thanks to laws designed to help the hundreds of millions of poor farmers who scratch a living from India’s soil. The average Indian farmer has less than 2 acres (0.8 hectares) and most struggle to eat two meals a day. Singh’s family farm has 100 acres.
Worse still, some people are buying agricultural land to avoid paying taxes by declaring their earnings as returns from farming, opposition lawmaker Sharad Yadav told parliament in March. Citizens declared about $29 trillion worth of agricultural income in the year through March 2011. That’s almost 15 times the value of India’s economy.
The figure was the result of a Right to Information request by a former tax officer Vijay Sharma, who says the number is probably a computation error and should be closer to 1 percent of GDP or $20 billion. Several requests for clarification from the government have gone unheeded, which pushed him to approach the courts. In the nine years through March 2016, Indians declared $21 billion as agricultural income, according to provisional data from the Revenue Department. The confusion, however, underscores the fog of uncertainty surrounding the estimates.
“It’s a simple case of money laundering,” said Sharma, who served in the tax department for over four decades.
Responding to Yadav, Finance Minister Arun Jaitley said authorities are investigating tax evaders that include some “prominent names” and urged the opposition not cry “political victimization” when they are prosecuted. He didn’t name names.
The lost revenue is a blight in a nation where direct taxes as a share of the economy have fallen to the lowest in almost a decade, despite Prime Minister Narendra Modi’s pledge to crack down on tax evasion.
With so little revenue, the government is having to borrow a gross 6 trillion rupees ($89 billion) to help fund the government and finance spending on roads, ports, power plants and other public projects this fiscal year. The government should start taxing large farmers to reduce that debt burden, said Parthasarathi Shome, a former finance ministry adviser.
“It is a question of equity,” said Shome, who also served as the chief of tax policy at the International Monetary Fund in the 1990s. “There are top-of-line farmers who are well protected by incentives and it is high time that we start thinking of taxing them.”
Jaitley has ruled out imposing income tax on farmers, most of whom struggle to even feed their families from their small plots. Almost 12,500 farm workers committed suicide in 2014, junior Agriculture Minister Mohanbhai Kundariya said in April.