October 11, 2015

Black Money Farce

NARENDRA Modi’s boastful claim that he will bring back all the black money stashed abroad is fast turning into a farce. Modi had promised during the Lok Sabha election, to bring the lakhs of crores of rupees illegally kept abroad. He had declared that when all this money comes home, every person in India would get Rs 15 lakhs. The government had got a legislation passed in parliament Black Money (Undisclosed Foreign Income & Assets) Imposition of Tax Act 2015. Under this Act, the government offered a one time amnesty scheme for those holding black money abroad to declare it by September 30, 2015. Those who made such declarations would get an amnesty and would be able to keep their money after paying 30 percent tax and a 30 percent penalty. At the end of the three month period, the government has got 638 declarations amounting to Rs 4147 crores, which is not even a tiny fraction of the billions of dollars in tax havens and foreign accounts. The government will get 60 percent of this Rs 4147 crore in the form of tax and penalty which amounts to Rs 2488 crore. If Modi decides to distribute this to all Indians, given the current population of 130 crore, this works out to Rs 19 per person. A very far from the Rs 15 lakh promised! Given the paltry figure realised, the finance minister Arun Jaitely has belatedly admitted that the bulk of the black money is in India where it is generated. But then he has gone on to make the wrong assumption that black money can be eliminated by rationalising tax rates which will help the people comply and end large scale tax evasion. Black money is not being generated due to high tax rates. The policies pursued by the government itself encourage tax evasion and generation of black money. The Participatory Notes issued by foreign portfolio investors is one such instance. P Notes, whose source of funds are not revealed, effectively permits the return of unaccounted wealth held abroad to India. Yet participatory notes have not been banned. Similarly, fictitious long term capital gains are used for large scale tax evasion. The Modi government has not cracked down on money laundering by multinational banks such as the HSBC. Nor has it followed up vigorously with the concerned countries where details of foreign account holders are available. A major source of black money generation is the real estate sector. The Modi government has taken no step whatsoever to curb the use of black money in this sector despite numerous suggestions and measures. Despite all the bombast against black money, the real truth is that the Modi government can ill afford to act against the interests of the big capitalists, real estate speculators and big traders who not only evade taxes but also run a parallel black economy.