How is cybersecurity contributing to the fight against tax evasion in India?

cybersecurity tax evasion

30th August 2017

Regular readers of our blog will be only too aware that, earlier this year, India launched its plan to become completely ‘cashless’ and instead focus the vast majority of its economy on digital payments. While this caused some initial challenges, the move has been designed to increase the staggeringly low number of people (1% of the total population) who currently pay income tax. But why is the government focusing its efforts on recruiting cybersecurity experts and how could this contribute to cutting tax evasion?

The scale of the Indian tax evasion crisis

India’s tax evasion problems have been the stuff of legend in recent years. It’s almost impressive that the country has continued to develop and expand such is the extent of its challenges obtaining funds from its enormous and, often, unregistered population. Until last year’s demonetisation of all INR500 and INR1,000 banknotes – which made up 86% of all cash circulating in the economy – 90% of all transactions were made in cash, which meant that there were almost no official records of individual incomes. Through the development of a programme called Aadhaar, the true scale of the Indian tax evasion crisis had become apparent.

Successful plan

The strategy has turned out, initially at least, to be a success. India has the second largest smartphone market on Earth, and this has encouraged citizens to turn to digital wallet apps like PayTM and Freecharge (similar to Apple and Android pay, Google Wallet etc.) to conduct transactions, which allows the authorities to better monitor income and payment records.

However, while the programme has opened up an entirely new world of possibilities, it has also created enormous challenges – specifically, related to cybercrime.

The role of cybersecurity in tackling tax evasion

Cybercriminals have noted the possibilities of hacking into programmes and stealing digital currency in India’s new, online-focused, financial market. Just last month, $32m was stolen from the Parity payment programme, and this was far from an isolated incident.

This rising trend has forced Indian financial firms – and those in the wider ecosystem – to turn to online experts to build more robust defences that will enable them to fight off attacks and therefore protect the country against future cases of tax evasion.

Stephen Neumeier, Kaspersky Lab Asia Pacific Managing Director, commented on the threat. “It’s a well-known fact that hackers are almost always motivated by money, and the growth of a cashless economy in India would attract their attention, undoubtedly. It is a must for consumers, banks, and the government to work together in beefing up India’s cybersecurity defences to safeguard money online. Like constructing a sturdy fortress, securing payment networks, banking systems and the Internet requires a brick-by-brick approach. In this case, the bricks are the highly cyber-savvy users and the efficient cybersecurity solutions. Lack of either can create a vulnerability cyber attackers are waiting for and willing to exploit.”

Ultimately, the effectiveness of India’s bid to ‘go cashless’ hinges on the robustness of its online defences, and it’s highly likely the country will look to recruit even greater numbers of cybersecurity experts in the coming months. This means that UK firms placing IT specialists may be in luck, but India’s new and improved tax system also increases risk for agencies which need to ensure that their contractors are onside with bolstered legislation. If you’re at all unsure about the status of the professionals you’re placing – security experts or not – then partner with a specialist before it’s too late.


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