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Drumming up tax payers in Bangalore: Shaming defaulters

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Media captionWatch: Pay your taxes, or Bangalore will send round the band

The band of drummers, with their matching shirts and bright bandanas, is beating out a fast-paced tattoo to a small appreciative audience.

With the sound of the drums echoing off the walls of the surrounding buildings, it feels as if it could be an impromptu street performance - but it's not.

This is tax collecting Bangalore-style.

Fed up with companies refusing to pay their tax bills, the city has gone one better than merely sending out reminder letters.

Instead it is striking back, shaming local tax avoiders, through the use of music.

Bangalore has a clear message to offenders: Pay up or we send in the drummers, and then everybody will know what you've done wrong.

And so far, it seems to be working.

"People like this. They gather to hear the drums playing," says one of the band, 19-year-old drummer Shankarantha.

The band's co-ordinator is K C Chellaiah, who is standing to one side, watching his team in action. He says while the audience might like it - those targeted do not.

"The company owners get afraid of it when the troupe starts beating the drum," he says.

"Usually the firms have a good name in their area and when this comes to people's attention and the real picture comes out of it, they start paying their tax immediately - they respond immediately."

Bangalore is India's third-largest city, and as the centre of the India's hi-tech industry, its economy is worth some $9.6bn (£6.1bn) a year.

But it has a problem with unpaid taxes, and so six months ago it started employing its teams of drummers.

And it is proving to be steady work for the musicians.

Band member Shankarantha says that he and his fellow players have been called out to beat the drum for Bangalore's tax department four times in the past few days.

"Initially we didn't get a good response," says Shivakumar CM, an executive engineer with Bangalore Municipal Corporation.

"Since then we have seen that about 50% of the firms we have targeted have come to us to pay up their taxes.

"We're getting a good response from companies which have been embarrassed," he says.

"This is the primary motor of the drum-beat programme."

Pay up 'please'

But Bangalore is not alone in this. India has one of the lowest rates of tax payment in the world. Only 3% of India's population of 1.2 billion pay any tax at all.

There are several reasons for this:

  • A third of Indians - some 400 million - are so poor that they are exempt
  • Much of the agricultural sector is paid through cash , which makes incomes very hard to track
  • India's tax-collection system is poor, and the rules are complex and contradictory
  • Lots of the super-rich and middle classes evade paying taxes.
Image caption India is also making it easier for people to pay their taxes online

This year, India's government has decided on a two-pronged approach to its tax problem.

First, all those officially listed as earning over $185,000 a year - 42,000 individuals - will have to pay an extra 10% surcharge for one year.

The tax rate for higher earners will temporarily rise from 30 to 33%.

Yet when you realise that India is reckoned to have 125,000 millionaires, but only a third of them are officially listed as higher-rate tax payers, Delhi's problem becomes clear.

Second, the finance ministry has been sending out what it says are "polite" reminder letters to 1.2 million people who appear to possess enough wealth to require paying taxes.

Instead of focusing on declared income, India's tax collectors are looking at people's spending patterns - what significant payments are made on credit cards, and whether properties or shares have been bought or sold.

Cutting government spending

Estimates of how much tax Delhi is losing vary, but the government itself says people avoided paying some $70m of taxes and duties in the first three months of 2013 alone.

But improving the tax-collection rate nationally will be a challenge.

"Trying to enhance tax collection from the sectors which are not paying taxes is important," says Nikhil Bhatia, executive director at PricewaterhouseCoopers.

But before many more Indians would be willing to pay up, he says the government must prove that it is spending the tax revenues it does get efficiently.

"Curbing expenditure which is not fruitful and which is not seen to be a good return on contributions paid by tax payers will also make people a lot more willing to pay."

Meanwhile back in Bangalore, Shankarantha is busy playing the beats on his drums.

But he says he is just happy that people are responding and Bangalore's council is getting more taxes out of it.

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