Digital profiling of taxpayers?

ameya's picture

First of all, hats off to the team Revenue for the idea to refer to "LinkedIn" profile of deputed employees in PE determination.  Delhi Tribunal accepted "LinkedIn" profile as an evidence in the ongoing hearing relating to PE determination for a GE group entity (click read Taxsutra alert).


Tribunal observed that "LinkedIn profiles is not in the nature of hearsay because it is the employee who himself has given all the relevant details and the same relate to him. These details are akin to admission made by a person. No third party is involved in creating of this LinkedIn profiles and, therefore, it cannot be said to be an hearsay evidence."


I think its a fair argument from Revenue's side & accepted by ITAT with an open mind.  This would certainly be helpful in determining "real" nature of the deputation arrangement and employee role. Ofcourse, as held by ITAT, this would not be the "conclusive evidence" and employer can rebut the same on facts.


The "LinkedIn" approach indicates that taxpayers in future could be subject to "digital profiling" from tax administrators.  Revenue may effectively use "digital graph" of taxpayers in determining correct taxable income. GE ruling here is a classic example.  But consider another simple case, which a former CFO of a leading IT company told me a few days ago. Can Revenue simply map  "Check-In" status on Facebook at five star hotels or exotic destinations outside India to corroborate life style expenses & income?


Tax Administration Reform Commission (TARC), headed by Dr Shome, in its recent report, has emphasized on use of technology & risk based approach by Indian Revenue.  The "digital profiling" of taxpayers could be a great tool that Revenue could leverage upon (subject to larger debate on data privacy on social media).


While Tax Administration is grappling with digital economy, BEPS, perhaps there is a silver lining too.