It’s all black to back now
The taxman, newly armed with information-sharing agreements with a clutch of countries where Indian wealth is suspected to have been stashed, is thinking up a disclosure scheme that just stops short of being an amnesty. HT writes.india Updated: Sep 16, 2011 01:05 IST
The taxman, newly armed with information-sharing agreements with a clutch of countries where Indian wealth is suspected to have been stashed, is thinking up a disclosure scheme that just stops short of being an amnesty.
India’s experience with tax amnesties has been patchy: the periodic schemes have unearthed trifling amounts and have faced court strictures for encouraging bad behaviour. We are, however, now part of a global crackdown on black money after the 2008 financial meltdown that has led India to review its treaties with 79 countries, including tax havens like Mauritius.
Similar schemes are already in force in the US, Britain and Germany. The Indian taxman now thinks he knows whether money kept abroad by companies and individuals is evading Indian taxes, and can afford to drop the immunity from prosecution that accompanied previous amnesty schemes.
This time it’s not a carrot but a politely worded stick.
And it fits snugly into the government’s policy response to black money. India is a member of the G-20’s financial action task force that is spearheading the global anti-money laundering initiative. An enlarged domestic law in 2009 has seen the number of money laundering cases shoot up from 50 between 2005 and 2008 to over 1,200 by January 2011.
The finance ministry has commissioned a study on unaccounted income and wealth held within and outside India. The study will also suggest methods to gouge out illicit money.
Besides these, a group of ministers looking into graft is examining State funding of elections, speedier processing of corruption cases of public servants, transparency in public procurement and contracts, discretionary powers of central ministers and a competitive system for exploiting natural resources.
Getting a handle on the size of India’s black economy is deucedly difficult. Independent think tanks commissioned to come up with an estimate of how much of Indians’ income goes unreported and where it ends up must devise a hypothesis and test it on data that is just not there.
Economists tasked with the black money census will most probably come up with something that pits two sets of claims against each other and work on the discrepancies.
For example, what India says it trades with the world and what the world says India trades with it, or what sellers say they have sold and what buyers say they have bought.
If we do get a fix on the black money generated from legitimate economic activity a large chunk of the underground economy will lay exposed.