On Deterring Undervaluation of Property

IT was more than a decade and a half ago that Nicholas Kaldor suggested as part of his package of tax reform for India that the government ought to have the right to take over a property at the taxpayer's valuation where the government believes that the said property's value has been understated for tax purposes. Kaldor's recommendation was a broad one in the sense that the government's right to acquire property was related to the taxpayer's declaration of value for purposes of taxation regardless of whether or not the property passed hands in sale or underwent any construction. Almost exactly 15 years thereafter, the Direct Taxes Enquiry Committee, more popularly known as the Wanchoo Committee, when confronted with the problem of the use of property undervaluation as an outlet of tax-evaded money, recommended that the government should acquire the right to take over properties whose value has been understated in formal documents of transfers on sale. The purpose of both Nicholas Kaldor and the Wanchoo Committee was expressly the same, namely to deter the use of property undervaluation with a view to evading taxes, but the Wanchoo Committee's recommendation was far narrower than Kaldor's.